The company is ready to seize opportunity to expand internationally.
The retailer delivered strong second-quarter earnings and raised full-year guidance.
Lululemon Athletica's new CEO is on his way to generate profits and expand the brand internationally using the experience he gained at his previous employer, Sephora.
"My experience within Sephora and what that business had built as we doubled it over the time that I was there and scaled it to my experience as a guest," Calvin McDonald, who was appointed as Lululemon's new CEO last month said on Thursday's second-quarter earnings call. He says both Sephora and Lululemon have highly-engaged cultures, disruptive innovation DNA, and experiential retailing values.
During McDonald's five-year tenure at Sephora, the beauty store was a growth engine within the LVMH family of global luxury brands. Under McDonald's leadership, Sephora more than once delivered double-digit annual growth in both revenue and profits and continued to gain market share. Along with particularly strong growth in North America and Asia, Sephora last year inaugurated a new territory in Germany and expanded its online presence in Scandinavia, Mexico, and the Middle East.
McDonald expressed his passion for Lululemon to dominate the globe by recognizing similarities between his current and past employers and seizing opportunities with international expansion, especially in Asia. "We all would agree, and when I was looking outside in that, we have a real big opportunity internationally, in particular in Asia, and it's one that the team feels is a growth potential, just proportionate growth for this business and brand," McDonald said.
And Wall Street analysts agree.
"A framework of 10% square footage growth, a men’s business north of $1 billion, a digital ecomm penetration of more than 30%, and a bigger International business with Asia alone adding over $1 billion would be the ongoing building blocks," RBC analyst Brian Tunick said in a note to clients, while raising his price target to $160 from $130.
"Market growth in Europe remains impressive, up strong double-digits YoY. For 2018 all in, international is expected to be profitable, led by Asia despite Europe taking longer to ramp."
Lululemon shares jumped as much as 15% to $158.70 on Friday — almost hitting Tunick's target — after the company posted strong top and bottom results and lifted its full-year guidance.
Lululemon shares have nearly doubled this year.