Lululemon Athletica Inc. reported a tough second quarter on Thursday as revenue, profits and comparable sales all declined year over year.
The Vancouver-based athletic apparel retailer reported a four per cent drop in year-over-year net revenue to US$2.4 billion, in line with analysts’ forecasts.
Net income was US$329 million, up from US$195 million in the first quarter but down from US$370 million a year ago. Diluted earnings per share were US$2.92, down from US$3.10 per share last year but overshooting analysts’ expectations of US$1.79 per share.
“As we moved into Q2, we faced negative commentary in the media and social channels which impacted traffic, and softer than planned response to some new product launches, which contributed to a moderating sales trend,” Lululemon’s interim co-chief executive and chief financial officer Meghan Frank said on a call with analysts.
The company reported a nine per cent dip in comparable sales, a metric that includes net revenue from online sales and established stores that have been open for at least 12 months. The Americas region led the decline with a 12 per cent drop, while international comparable sales fell three per cent.
The latest results mark the last full quarter before Heidi O’Neill, a former executive at Nike Inc., takes over as Lululemon’s new chief executive on Sept. 8.
Frank and chief commercial officer André Maestrini have co-led the business since former CEO Calvin McDonald stepped down on Jan. 31. In a press release, Maestrini said Lululemon looks forward to welcoming O’Neill “as we begin an exciting new chapter for the company.”
The retailer has faced a number of challenges over the last year, including U.S. tariffs and the end of the de minimis duty-free shipping loophole; a high-profile proxy fight with its founder, Chip Wilson , which settled in May, and slowing sales in its home North American market.
Lululemon’s second quarter sales were down in the Americas, where net revenue declined eight per cent to US$1.6 billion. In North America, where it generates most of its sales, net revenue was down 11 per cent in Canada and eight per cent in the United States.
In mainland China, a key growth market for the company, net revenue grew four per cent to US$407 million. The region now accounts for 17 per cent of the brand’s sales, ticking up from 16 per cent in the same quarter last year.
Net revenue in the rest of the world was up five per cent to nearly US$392 million.
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