Strong fourth quarter sales, flat profit and international expansion plans helped send shares of Yogawear maker Lululemon (Nasdaq:LULU) soaring.
Revenue jumped 16% to US$602.5 million in the quarter that ended February 1, the Vancouver-based company announced March 26. Annual sales were almost as strong, rising 13% to US$1.6 billion.
Profit, however, was relatively flat although it beat many analysts’ estimates. Quarterly net income rose just over 1% to US$110.8 million whereas annual net income dipped more than 14%.
“Our solid performance in the fourth quarter builds on the momentum that began in the third quarter and reflects improved traffic and a strong guest response,” said CEO Laurent Potdevin in a statement.
“2014 was a critical year when we strengthened our leadership team and made important investments in our product pipeline, guest experience, brand, and community engagement. In 2015, we expect to substantially complete this foundational work and accelerate our investments in innovation to drive sustainable global growth as we continue to lead the market that we created.”
That global expansion includes a goal of having 20 stores each in both Europe and Asia.
Other new stores are set for the U.K., Germany and Hong Kong.
Potdevin said in a conference call that he believes international expansion could eventually exceed North American revenue.
That would be quite a change for the company, which many years ago expanded to Japan and Australia only to see those stores underperform. The company then pulled out of Japan in 2009 and whittled down its number of Australian franchised locations.
Lululemon's presence outside North America currently includes at least one store in Australia, China, U.K., New Zealand and Singapore as well as showrooms in Germany, Hong Kong and the Netherlands, according to its website.
E-commerce is increasing as well with sales rising 17% to US$114.5 million, or 19% of the company's sales in the quarter that ended February 1.
Stephen Ward, who is commercial director of the retail research and consulting firm Conlumino, hailed Lululemon as a strong brand with a devoted following.
“Notwithstanding its yoga pants misstep, the company genuinely invests in product quality and, accordingly, is able to charge premium prices,” he said.
“Equally interesting is the company’s overseas expansion efforts which now include a partnership with [shopping mall owner] Majid Al Futtaim to open stores in the UAE, Qatar, Bahrain, Oman and Kuwait; starting with a shop in Dubai this fall.”
Ward said that as conditions in Lululemon’s North American base become more challenging, this global expansion will provide another much needed stream of growth.
Lululemon shares jumped more than 7% and were trading up 6.58% at US$64.96 at press time.
