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Duluth Trading Q3 sales climb amid growing brick-and-mortar footprint

BY Marianne Wilson

Duluth Trading Co. posted mixed results for its third quarter as it continues to expand its store base.

The lifestyle retailer of men’s and women’s casual wear, workwear and accessories reported that net sales increased 25% to $83.7 million in the quarter ended October 29, compared to $67.0 million in the year-ago period. The increase was primarily attributable to an increase of 12 stores over the same period a year ago. It was the retailer’s 31st consecutive quarter of increased net sales year-over-year.

The company reported a net loss of $0.8 million, or $0.03 per diluted share compared to net income of $0.5 million, or $0.01 per diluted share, in the prior-year third quarter, amid increased costs. It was Duluth’s first loss since going public two years ago.

“Our 25% top line growth reflects our commitment to investing in our omnichannel model. We are growing our brand, attracting new customers, and the direct growth in our established store markets continues to perform well,” said Stephanie Pugliese, CEO of Duluth Trading.

The retailer, which started out as a catalog operation and then added e-commerce, opened 15 new stores in fiscal 2017, giving it a total of 31 locations, which is about double what it had at the beginning of the year. Stores generated 35% of the company’s total revenue in the third quarter. To date, it has signed nine leases for store openings in 2018, including three locations in Texas and one in South Portland, Maine. More are expected.

“We continue to attract new customers through our retail stores and during the third quarter, new customers acquired through retail was up 81%,” Pugliese said.

Duluth describes itself as a lifestyle brand for the modern, self-reliant American, offering high-quality, solution-based apparel for men and women who lead a hands-on lifestyle. Known for its quirky, fun advertisements and marketing, the company strives to offer customers an engaging and entertaining experience, online and in stores.

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Walgreens takes big stake in leading Chinese pharmacy

BY Michael Johnsen

Walgreens Boots Alliance is expanding its global retail pharmacy operations.

Walgreens on Wednesday announced it was acquiring a 40% stake in Sinopharm Holding GuoDa Drugstores in a deal worth approximately $416 million.

“We are very pleased to become a strategic investor in GuoDa,” stated Stefano Pessina, executive vice chairman and CEO, Walgreens Boots Alliance. “It is China’s leading pharmacy chain and we believe that we can positively contribute to its continued successful development with our global pharmacy expertise. We have had a presence in China for around 10 years, initially through Alliance Boots, and we are excited about the opportunity to further invest in the country’s fast growing retail pharmacy sector.”

GuoDa is a leading retail pharmacy chain in China, and has been pursuing its vision for expansion across the country in the context of the ongoing healthcare reforms and increasing importance of the pharmacy channel in the country. It has 3,500 retail pharmacies across 70 cities in China, according to Business Insider.

Walgreens Boots Alliance, as a global pharmacy-led enterprise, believes it is well positioned to provide its significant expertise to GuoDa and support its growth ambitions.

The transaction is subject to regulatory review and approval, and other customary closing conditions. Upon completion, Walgreens Boots Alliance would account for this stake as an equity method investment.

 

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Lululemon strong in Q3; upbeat about holiday

BY Marianne Wilson

Some other players in the sports and athleisure market may be having a rough time of it these days, but Lululemon Athletica Inc. is not one of them.

The maker of yoga wear and other specialty apparel raised its forecast for the year after easily topping analysts’ estimates for the third quarter, fueled by strong digital growth. Lululemon’s net revenue increased 14% to $619.0 million in the quarter ended Oct. 29.

Total same-store sales increased 8%, Comp sales surged 26% in the direct channel and 2% in stores.

The company reported net income of $59 million and earnings per share of $0.43 for the quarter, down from $68 million a year earlier. Excluding the impact of the Ivivva restructuring (the company announced in June it was closing most of its Ivivva kids stores), adjusted earnings per share would have come in at $0.56. Analysts had expected adjusted earnings of 52 cents a share on sales of $610 million, with a comp rise of 5.3%.

Kevin Wathey, a consultant at GlobalData Retail, commented that the strength of Lululemon’s bottom line is mostly due to its ability to resist the temptation of excessive discounting — even in a market that has become steadily more promotional.

“In our view, this is made possible by the fact that Lululemon, unlike so many of its rivals, has a line-up of products that people want and for which they are prepared to pay full price,” he said. “Constant innovation and a laser-like focus on functionality and quality are central to this. Complementing the product proposition are Lululemon’s efforts to foster loyalty. The company has long understood the power of creating a sense of community, and we are encouraged to see it extending its efforts in this area.”

Lululemon said that its holiday season was off to a great start, with the company experiencing its highest traffic and largest sales ever on Black Friday and on Cyber Monday. It raised its forecasts for its profit and revenue for its fiscal year. It now expects adjusted earnings of $2.45 to $2.48 a share, up from a prior forecast of $2.35 to $2.42 a share. Revenue is expected in a range between $2.59 billion and $2.61 billion, up from $2.55 billion to $2.56 billion.

The strength of our Q3 earnings supports our unique position as the global brand defining an active, mindful lifestyle,” said Laurent Potdevin, Lululemon CEO. “I’m grateful for the enthusiasm I see every day across our collective as we remain on our path to delivering $4 billion in revenue in 2020.”

Lululemon also announced that its board of directors has approved a new stock repurchase program for up to $200 million.

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