(Bloomberg)—Lululemon Athletica Inc.’s online sales increased 29.3% in its fiscal second quarter, and it is reorganizing its children’s brand, Ivivva, to be primarily e-commerce focused.
The retailer, No. 83 in the Internet Retailer 2017 Top 500, kicked off its biggest rally in three months after reassuring investors that it remains a bright spot in a moribund athletic-apparel market. Improved marketing, a push overseas and a deeper reliance on e-commerce are all fueling growth at the brand in its fiscal second quarter ended July 30. The company’s Q2 profit and sales topped analysts’ estimates, and it delivered a forecast for the year that beat projections.
Direct to consumer net revenue increased 29.3% (30% on a constant dollar basis) in the quarter, to $113.05 million from $87.40 million a year ago, the retailer said. Excluding the impact of an online warehouse sale during Q2, e-commerce revenue increased 15% (16% on a constant dollar basis), Lululemon said.
For the first six months of fiscal 2017, Lululemon’s e-commerce sales were $210.27 million, up 13.7% from $184.97 million.
“We are still in the early innings of our e-commerce business and continue to see outsized growth potential here,” Stuart Haselden, chief operating officer and chief financial officer, told analysts on the conference call Thursday, according to a SeekingAlpha transcript.
Improvements to the website are in the works for the third quarter and are expected to be in place in time for the holiday selling period. Those updates include enhancements to images and visual merchandising, such as presentation of outfit possibilities, Haselden said. Site upgrades also will give Lululemon greater flexibility to more quickly update pages, and checkout improvements are coming, Haselden said, though he didn’t detail them.
As part of its focus on core operations, Lululemon in June said it would restructure its kids business, Ivivva, and this week said it intends to complete that process in Q3. The company said it closed 40 of its 55 Ivivva shops in August and will convert half of the rest to Lululemon-branded stores.
Comparable-store sales, including e-commerce, a closely watched metric, rose 7% in the quarter—more than the 4% increase forecast by analysts, according to Consensus Metrix. Total revenue was $581.05 million, up 12.9% from $514.52 million in the year-ago quarter. Total sales for the period were $1.101 billion, up 9.0% from $1.010 billion in the first six months of fiscal 2016.
The upbeat results follow disappointing quarterly reports from sporting-goods companies like Finish Line Inc. (No. 114) which stoked investor fears that the athletic industry is flagging. Lululemon CEO Laurent Potdevin is working to diversify the yogawear maker’s offerings in a crowded marketplace. He’s also trying to appeal to more men and adding technical innovation to the clothing.
“The acceleration that we have seen across the business in the second quarter enables us to take another positive step on our path towards achieving $4 billion in revenue by 2020,” Potdevin said in a statement.
The retailer boosted its full fiscal-year revenue forecast to between $2.55 billion and $2.6 billion from a range of $2.53 billion to $2.58 billion previously. Lululemon said full-year profit, excluding some items, will be $2.35 to $2.42 a share. That topped analysts’ projections.