3 Things You Need to Know Before Lululemon Reports Earnings Tomorrow

lululemon athletica (NASDAQ: LULU  ) is set to report third-quarter earnings on Thursday, which will give investors a much-needed glimpse into the health of its business. But the yogawear retailer gave the markets something else to talk about ahead of its earnings release: a new CEO. On Tuesday, Lululemon announced that Laurent Potdevin would take over the helm from Christine Day, as soon as January 2014.

The leadership shuffle comes more than six months after Day said she would be leaving the company for personal reasons. Let's look at what this means for Lululemon going forward, and examine two other things investors should watch for when the company reports tomorrow.

A new Day has come
Forget New Year's resolutions. For Lululemon, the new year brings new leadership. As the yoga-apparel company's new CEO, Potdevin should help restore the brand's appeal after a string of quality-control issues bruised Lululemon's image earlier this year. Potdevin's former role as president of Toms shoes also makes him a good cultural fit for the yoga brand.

With Lululemon, Potdevin is set to earn a base salary of $900,000, as well as incentive-based bonuses, according to SEC filings.

Additionally, Lululemon's controversial founder, Chip Wilson, is resigning from chairman of the board of directors. This change can only benefit the company given Wilson's recent public remarks about women's bodies in yoga pants.

Of note is that Lululemon's management announced these leadership changes before the company's earnings. It would have been easy to piggyback the changes onto the company's quarterly results. But releasing the information earlier in the week gave investors a chance to digest the news so the attention can be focused back to the company's quarterly performance tomorrow.

Stretching overseas
Looking to the company's upcoming quarterly results, investors will want to know that Lululemon's global expansion plans are on track. Growing its footprint overseas is key to Lululemon's future success. The retailer ended its second quarter with 226 stores in North America and Australia, after adding eight Lululemon locations during the quarter. But right now the company only operates 21 stores outside of Canada, the U.S., and Australia. With new distribution centers up and running in Europe and Asia, there's plenty of room for Lululemon to grow in international markets. Lululemon is already the most productive apparel retailer in North America. In fact, the retailer's U.S. stores generate $2,050 in sales per square foot today; just imagine the potential that creates for Lululemon if it's able to replicate that success in new markets.

Aside from this, investors will also want to keep an eye on Lululemon's same-store-sales figure. Sales at established stores could be crimped in the quarter because of ongoing inventory problems tied to the retailer's luon pants recall in March. Lululemon lost as much as $67 million in revenue this year after recalling 17% of its signature yoga pants for being see-through. Now the company expects comparable-store sales in the mid-singledigits.

Analysts, on the other hand, are looking for Lululemon to post a third-quarter profit of $0.41 on revenue of $376 million. While we will have to wait until tomorrow to see how the retailer measures up to Wall Street's expectations, Lululemon's certainly heading in the right direction.

The real growth opportunity for investors...
Lululemon was once a high-flying growth stock that every investor wanted a piece of. However, the stock has lost its way recently. Instead of waiting on the sidelines for things to turn around at Lululemon, investors can unlock six truly wealth-changing stocks today -- for free! Discover The Motley Fool's top stock picks for ultimate growth in this free report: "6 Picks for Ultimate Growth." Stop settling for index-hugging gains... and click HERE for instant access to a whole new game plan of stock picks to help power your portfolio -- it's free for a limited time. 

 

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2761215, ~/Articles/ArticleHandler.aspx, 8/30/2014 10:19:31 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement