New products help Lululemon top analysts’ sales estimates in Q1

Brand new products and an expanded womenswear collection have helped Lululemon Athletica to top market estimates for its first-quarter sales.

The Canadian company posted Wednesday a sales increase of 17 percent to 495.5 million dollars in the quarter ended May 1, compared to the 487.6 million dollars projected by analysts.

After missing analysts' earnings estimates by one penny, Lululemon CEO Laurent Potdevin extolled the virtues of his company's new loose tops for layering and its menswear strategy. He sounded excited about opening 18 percent more square footage of stores over the quarter, and he praised his company for being "channel agnostic."

”What matters is brand demand remains strong”

"[The] quarter missed by a penny on higher foreign exchange expenses, which doesn't matter," Jefferies analyst Randal Konik told investors. "What matters is brand demand remains strong, gross margin recovery is on track and inventories are now in line."

While topline sales growth grew given Lululemon’s newly opened stores, inventory levels also rose 21 percent, to 286.2 million dollars from 236.5 million dollars at this same time last year, recalls ‘Business Insider’.

In this vein, it’s noteworthy that the athletic apparel retailer opened seven more outlets over the last year to "ensure liquidation capacity for our growing full price business," according to CFO Stuart C. Haselden.

Analysts warn Lululemon on the need of “maintaining the integrity of pricing”

Haselden also mentioned that the company was going to keep focusing on inventories in order to "maintain the integrity of pricing."

Truth is that Lululemon's first-quarter comparable-sales beat was driven by continued strength in men's, as well as its women's bottoms business. The company recently rejiggered its entire women's pants assortment, which has helped that category outpace the company's overall sales trends, highlights ‘CNBC’.

Likewise, Lululemon is now shifting its focus to its women's tops assortment, which CEO Laurent Potdevin said logged another positive comparison during the three-month period.

“In terms of the key metrics we were looking for in the quarter, we got everything we wanted, and then some,” Howard Tubin, an analyst at Guggenheim Securities, said in a note. “Lululemon’s merchandise assortment is resonating with shoppers.”

On the wake of the news, rose 4.5 percent in afternoon trading amid investor optimism that the company’s margins were recovering.

Looking ahead, Potdevin stated that the company's "return to gross margin growth" would be "taking shape in Q2”.

Image:Lululemon Athletica