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Lululemon Q3 earnings, sales beat Street; testing paid membership program

BY Marianne Wilson

Lululemon Athletica Inc. reported earnings and sales that beat expectations amid ongoing growth in its men’s division, but offered a fourth-quarter outlook that was disappointing to investors.

On its quarterly earnings call with investors, the athleisure retailer said it has been testing a loyalty program in Edmonton (Canada) that charges members $128 a year for access to special events and classes, free expedited shipping and other benefits. The program has been so successful that it plans to expand the test to other markets.

“Guests are seeing value beyond just the product,” Lululemon CEO Calvin McDonald said on the call.

The company’s net income rose to $94.4 million, or $0.71 a share, for the quarter ended Oct. 28, compared to $58. 9 million, or $0.43 a share, in year-ago period. Adjusted diluted earnings per share were $0.75, up from $0.56 last year. Analysts had expected adjusted earnings of $0.70 a share.

Net revenue increased 21% to a better-than-expected $748 million amid strong sales of men’s and women’s outerwear. Lululemon’s expansion into men’s clothing is paying off, with the category recording the highest increases overall. Total same-store sales rose 17%.

The company also increased its guidance for full-year profits, and met analysts’ expectations for its fourth-quarter forecast.

“Lululemon has achieved a high level of success over the past year and has established a solid foundation to continue to build our future. It’s been exciting to see guests around the world respond so strongly to our product offerings and improved digital experience.

For the fourth quarter, the retailer estimated revenue of as much as $1.13 billion with earnings of $1.64 cents per share, slightly below what analysts were expecting.

“Lululemon has achieved a high level of success over the past year and has established a solid foundation to continue to build our future,” said McDonald.

The company ended the quarter with 426 stores.

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