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Can Lululemon Keep Seeing Traction in Same-Store Sales?

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Sep. 22 2015, Updated 1:06 p.m. ET

Lululemon Athletica’s store comp trends in 2Q16

LULU’s same-store sales performance was strong in fiscal 2Q16. The vertically integrated retailer (XRT) (RTH) grew total same-store sales 6% year-over-year in reported terms. Same-store sales for brick-and-mortar stores came in at 1% in reported terms, driven by higher store traffic and higher transaction value in dollar terms. Negative currency movements due to the impact of the stronger US dollar reduced store comps (comparables) by five percentage points.

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Performance analysis

Lululemon’s same-store sales performance was healthy in 2Q16. There’s been a reversal in the negative trend that dogged the retailer for much of last year, particularly in its brick-and-mortar channel.

Store comps benefited from LULU’s strong performance from its men’s and ivivva lines. Total same-store sales came in at 31% for men’s wear and 27% for ivivva. LULU is targeting $1 billion from the sale of men’s products.

The company saw positive comp trends in Canada, a first after 12 quarters, according to Laurent Potdevin, LULU’s chief executive officer.

Earlier this month, LULU launched a new pants wall. The newly designed lines provide more choices to customers in fit and purpose. The company also launched several new fabrics, including its Nulu fabric that’s “engineered to be lightweight and have a soft second skin feel,” according to Potdevin.

Launching new products is critical for LULU’s premium product sales and business model. It’s vital in order for the retailer to stay competitive.

But currency headwinds that factored largely into the much lower figures are likely to continue and play a role in the coming quarters. This may even be a greater factor affecting future sales, considering the company’s expansion in Europe and Asia.

The designer effect

The adverse impact of higher competition also can’t be ruled out. While LULU is a premium brand, many of the newer lines are celebrity-backed or created by well known names in the fashion world such as Tory Burch and Dick’s Sporting Goods’ (DKS) Calia by Carrie Underwood.

Gap’s (GPS) Athleta line also announced a collaboration with fashion designer Derek Lam earlier this year. Calia and the Derek Lam 10C x Athleta brands had fashion shows at the New York Fashion Week in September.

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