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.
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.
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