Lululemon Surprises And Beats The Street

After kicking up some drama last week with a letter from a very disappointed founder excoriating Lululemon’s “underperforming board,” the tide of the headlines managed to turn some with the announcement this week that Lulu had managed to beat the street when it came to sales during Q1.

Sales were up 17 percent to $495.5 million in the quarter, clearing the analyst target of  $487.6 million by a comfortable margin. Not all the news was sunshine, however, profit was in negative territory, falling 5 percent during the quarter to $45.3 million due to increased costs. But while a fall in profit is never good, it was less than the $45.3 million analysts were calling for.

And inventory – the lead weight that has been dragging all sort of retailers down of late – seems to have been pared down. Not all the way – inventory remained 21 percent higher than they were a year ago at this time – but they are far below the 56-percent rise the firm was recently reporting in Q3 2015.

Will these results make Lululemon founder Chip Wilson feel better about the shape of things to come for the athleisure firm he founded?

In his letter last week he did note “management competence is uninspiring at best. I am not convinced we have the right leadership in place to catalyze the change necessary to win in the current global, multi-channel and dynamic environment.”

After the earnings, the good news for Lulu’s current leadership is that investors seem to disagree with Wilson at this point – shares were up 4 percent, adding 27 percent to the comeback stock performance Lulu is reporting this year so far.


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