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Lululemon Moves Into Upward-Facing Dog


Image source: Chrispictures / Shutterstock.com

What's going on?

Lululemon shares jumped over 9% on Wednesday after the yoga and athleisure apparel maker reported a bumper set of results for the latest quarter.

What does this mean?

Lululemon exceeded investors’ expectations on virtually every metric. Its sales grew 11% last quarter, helped by a 42% growth in “direct-to-consumer” sales (online orders placed directly with Lululemon, rather than via a third-party retailer). This growth is further evidence that companies with strong brand identities can benefit from ecommerce by cutting out the middleman – and make higher profit margins in the process. Relatedly, Lululemon’s profits beat Wall Street’s expectations.

Why should I care?

For markets: Lululemon is back to striking a powerful pose.

Having risen 21% in 2017, the company’s stock price stagnated in the early months of 2018. Part of the problem was the resignation of its CEO in February (Lululemon said he had “behaved unprofessionally”). The company is currently on the lookout for a new head yogi; in the meantime, it’s planning to focus on the creation of innovative products, attracting more male customers and expanding internationally. So far, investors like the sound of that.

The bigger picture: The competition is coming.

Lululemon has carved out a hugely successful niche as a purveyor of activewear: showing up to a date in yoga pants is now totally normal! But the bigger athletic apparel makers, notably Nike, are increasingly targeting Lululemon’s core market – and ecommerce behemoth Amazon isn’t far behind, as its push into own-label products relies heavily on athleisure. As these bigger competitors take aim at Lululemon, it will have to summon all of its inner strength and strike a defiant Warrior II pose to stay ahead of the game.

Originally posted as part of the Finimize daily email.

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