Athleisure giant to open smaller store model

Lululemon Athletica Inc. revealed that it plans to open smaller, “local” stores amid results that disappointed Wall Street.



Net revenue for the quarter ended July 31 increased 14% to $514.5 million, just shy of projections, from $453.0 million in the year ago period. Total comparable sales rose 4%, with in-store sales up 3% and direct to consumer sales up 6%.



Net income increased 12.5% to $53.6 million.



The company issued third-quarter sales guidance of $535 million to $545 million, compared with the Street forecast for $542 million.



"Our progress in the second quarter, especially in gross margin and inventory, marks the beginning of our recovery in profitability and sustainable long-term growth,” stated Laurent Potdevin, CEO, lululemon.



On the retailer’s quarterly conference call with analysts, Potdevin revealed lululemon plans to open smaller, “local” stores, ranging from 1,000- to 2,000-sq.-ft., the Financial Post reported. The first such local store opened in Fort Collins, Col., on Aug. 20, and the response has been overwhelmingly positive, according to Potdevin.



“These innovative, hyper-local community stores will allow us to come to life in front of influencer communities that we would not otherwise reach, offering events and programming that are relevant to the local community,” he said on the call



As of Jul 31, 2016, lululemon operated a total of 379 stores. For all of fiscal 2016, it expects to open 42 stores, up from previous guidance of 40 stores.