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Sep 8, 2020

Lululemon CEO 'cautiously optimistic' as online sales boom

Lululemon profit beat driven by surge in online sales

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Lululemon Athletica Inc. reported a surge in its e-commerce business as quarantined consumers flocked to comfy apparel like yoga pants. Chief Executive Officer Calvin McDonald said he is “cautiously optimistic” about the second half of the year.

In an echo of retailers including Gap Inc. and Nike Inc., Lululemon’s comparable online sales excluding currency impacts rose 157 per cent in the second quarter, the Vancouver-based company said Tuesday. The company has bolstered its online offerings with free online workouts and one-on-one video chats with sales associates.

Key Insights

-The company still isn’t offering a formal forecast for 2020, given ongoing pandemic-related uncertainty and consumer upheaval. McDonald said the company is “pleased with our overall business results” in the period ended Aug. 2, while citing an “uncertain environment."

-After missing analysts’ forecasts for sales and profit the previous quarter, the latest results suggest the company is now capitalizing on the embrace of comfy clothes by consumers who are working from home. While it’s mostly known for its yoga pants and exercise outfits, Lululemon has been expanding into casual clothes fit for travel and work.

-Lululemon’s shares have risen steadily in recent years, fueled by the company’s online boom and push into new categories like men’s wear. But with a valuation well above rivals, analysts have begun to question its ability to continue growing, with Citigroup cutting its rating on Lululemon’s stock last week.

Market Reaction

-The shares alternated between gains and losses in late trading, falling 2.7 per cent as of 4:41 p.m. The stock gained 51 per cent this year through Tuesday’s close.