Lululemon Athletica Inc. (LULU) saw sales fall 17 per cent in a quarter marred by the coronavirus pandemic, but the company says it is still well positioned to take advantage of the growing popularity of the athletic apparel category.
The Vancouver-based company, which reported earnings after markets closed on Thursday, saw sales in the three month period ending May 3 fall to $652 million as it shuttered stores across North America in response to the coronavirus pandemic.
The stock was down approximately 5 per cent in after hours trading, trading at $292.90 at 4:53 p.m. ET.
While e-commerce sales jumped 70 per cent in the quarter, it was not enough to offset the decline of in-store sales. Lululemon’s profit fell from $96 million last year, or 74 cents per share, to $28 million, or 22 cent per share.
Analysts had forecast a profit of a 23 cents per share, according to IBES data from Refinitiv. The results come after Lululemon's stock rallied through the coronavirus pandemic, surging to higher levels than it posted pre-COVID.
Still, with many people working and exercising from home amid the pandemic, Lululemon chief executive Calvin McDonald told analysts on a conference call Thursday that the company is well-positioned to take advantage of the surging popularity in the athletic apparel category.
McDonald said that the company saw one of its largest quarterly gains in market share in the athletic apparel category in recent years, according to data from NPD Group. He did not provide additional details.
“What we experienced in the (first quarter), and will quite honestly for a bit through 2020, are short-term operational challenges, but the demand for the brand and the demand for the category I feel has only strengthened through this,” McDonald said.
Since closing its locations in March, Lululemon has now begun reopening retail locations across North America, Europe and in Asia Pacific. As of June 10, the company said 295 of its 489 stores around the world have reopened. Approximately 50 per cent of the stores in North America are now open.
Lululemon has been one of the strongest performers in the retail sector through the coronavirus pandemic. While many retailers have seen their stocks tank as in-store sales disappeared, Lululemon’s stock has rallied, closing Thursday’s trading day at $308.12, a 74 per cent increase from mid-March when lockdowns began in North America. The company’s stock has repeatedly surpassed its record highs, trading as much as $324.76 per share this week.
The significant rally prompted Wells Fargo analyst Ike Boruchow to downgrade the stock earlier this month, citing the high valuation. However, he noted the fundamentals of the company’s business remain intact.
“Lululemon remains one of the strongest performing retailers in our coverage, with robust long-term global expansion opportunities,” he wrote.
“Though we’re downgrading the shares, we continue to believe that fundamentals remain solid.”
With files from Reuters