Lululemon In Restructuring Move As It Beats Estimates

In the first quarter results for the year, Lululemom Athletica Inc has posted profits amounting to $31.2 million. Shares of the athletic apparel maker rose by 16% during the late trading hours after the results were announced.

Profits per share were 23 cents while earnings per share when adjusted to cater for asset impairment expenses were 32 cents. This was higher than analysts had anticipated as the average estimate from a survey conducted on 17 analysts was adjusted earnings of 28 cents a share.

Higher revenues

Revenues generated by Lululemon in the first quarter amounted to $520.3 million. This was also higher than what Wall Street had been expecting as 13 analysts had expected revenues to come in at $512.7 million.

In the year’s second quarter which will end in August, the athletic apparel maker based in Vancouver, British Columbia, expects earnings per share to be between 33 cents and 35 cents. Revenues generated in the second quarter are expected to amount to between $565 million and $570 million. The average estimate from analysts was $563.2 million. For the full year, Lululemon is expecting the figure to range between $2.28 and $2.38 a share. Annual revenues generated are expected to range between $2.53 billion and $2.58 billion.

Restructuring efforts

Despite the results which topped estimates the athletic apparel maker will be undertaking a restructuring. The firm will be shuttering most if Ivivva stores while channeling more investment into its online operations. Almost of the 55 Ivivva stores will be shut down though the brand will continue to be sold online. At the close of Q1, Lululemon had 411 outlets in its portfolio. The Ivivva stores that will be shuttered will be converted and rebranded as Lululemon stores. The restructuring which is expected to cost the company between $50 million and $60 million will also result in all showrooms and temporary locations of Ivivva shut down.

The Ivivva brand, which was first launched in 2009 and was targeting girls aged between 6 and 12 with tank tops costing $44 and hoodies costing $78, was initially meant to sell apparel that could be used in a range of activities include soccer, track and field, figure skating and dance.

Online shift

According to the retailer’s chief financial officer, the restructuring efforts and the store closures will have been finished by the time the third quarter comes to an end. The development meshes with the company’s broader strategy of boosting online sales since like other retailers, customers have been shifting online.

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