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Tag: Sales

  • Indonesian retail sales experiences rapid growth

    Indonesian retail sales experiences rapid growth

    Indonesian retail sales posted solid growth in December, according to a central bank survey. According to the data release, December sales grew at 7.7 per cent throughout the territory, a significantly faster rate than shown in figures from the year previous, are more than double November’s growth rate of 3.4 per cent.

    Sales throughout the month were predominantly underpinned by purchases of food, beverages and tobacco, alongside cultural and recreational goods.

    The survey predicts Indonesian retail sales will grow at a year-on-year rate of 4.8 per cent in January.

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  • Ikea services foray boosts loyalty and sales

    Ikea services foray boosts loyalty and sales

    Ikea is turning to services to increase turnover and boost engagement with customers. Moreover, partnering with specialist companies in such areas as delivery and assembly allow it to focus on product design and sales, leaving post-checkout experiences in the hands of specialists, rather than committing its own staff and training resources. An example of the new Ikea services initiative is US odd-jobs app TaskRabbit, which Ikea bought in late 2017. Ikea recommends the service to customers who lack the time or patience to assemble their own kitset furniture products.

    Ikea reports that the number of jobs handled by TaskRabbit staff since it acquired the business had doubled and 10 per cent of the jobs undertaken are now assembling kitset furniture – five times the pre-purchase rate.

    Since the acquisition, TaskRabbit has expanded coverage to all 48 US cities with an Ikea store, launched in Toronto, Canada, and expanded in the UK beyond London.

    In Hong Kong, where few customers own cars, Ikea now offers both a delivery and assembly service with fixed fees according to location. Previously, it partnered with an app-based third party contractor.

    In Australia, Ikea has partnered with Airtasker and in India with UrbanClap, to offer assembly services.

    Reuters describes the Ikea services strategy as “a major strategic shift that it has been forced to adopt to stay in the game as waves of new competitors in an increasingly online world erode its dominance”.

    TaskRabbit’s quick success is prompting Ikea in the US to consider expanding services offered through Ikea, to include such tasks as interior design and furniture repair which would in turn potentially boost sales from stores.

    Jesper Brodin, CEO of Ingka Group, which owns most US Ikea stores, says TaskRabbit’s customer data could also help Ikea come up with new ideas for furniture.

    “As this community grows, it’s not only about fixing one or two things but actually to add professionalism in interior decoration, into ‘life at home’ practicalities,” Brodin said in an interview.

    “TaskRabbit is a super interesting business case because it is scalable, not only geographically but also into services at home.”

    GlobalData Retail MD Neil Saunders says a services foray could help Ikea boost its market penetration in the US, which is currently just 2 per cent. Despite the low market share, the US represents Ikea’s second-largest international market behind Germany, where it enjoys as 12 per cent share. Rivals like Walmart and Wayfair in the US have started offering assembly through TaskRabbit’s rival app Handy.

    Brodin wants TaskRabbit to expand into more countries.

    “We are convinced this is a way to access new customers in our cities. The convenience customer today has so many more choices, and they are used to getting a quick answer.”

  • India’s January retail inflation more than halved to 2.05 pc

    India’s January retail inflation more than halved to 2.05 pc

    India’s annual rate of retail inflation more than halved to 2.05 percent in January from a high of 5.07 percent during the corresponding period last year, official data showed on Tuesday. The downward trend in CPI, is due to food inflation which has further widened its negative trend. Fruits, vegetables and eggs continued to witness deflationary trend during January this year, with their prices declining 4.18 percent, 13.32 percent and 2.44 percent, respectively, according to the data.

    Industrial production jumped to 2.4 percent in December, 2018 from 0.5 percent in November, 2018 driven mainly by a sharp spike in manufacturing index which rose to 2.7 percent vs -0.4 percent month-on-month.

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  • Asia-Pacific shoppers favour cross-border shopping

    Asia-Pacific shoppers favour cross-border shopping

    Half of online shoppers in Asia-Pacific make purchases cross-border, according to a recent report by yStats. The top two markets for cross-border shopping in the region are Hong Kong and Singapore while Japan shuns the trend, with over nine in 10 online shoppers buying only domestically. The tendency to buy from foreign online sellers also prevails in Australia and New Zealand, where a double-digit share of digital spending is cross-border.

    The top three destinations of cross-border online shoppers in Asia-Pacific are China, the US and Japan. Chinese online shoppers themselves prefer shopping platforms hosted by local providers, such as Tmall Global, Kaola and JD Global.

    Apparel and accessories was the most-in-demand product category. In South Korea, this sector accounted for more than one-third of e-commerce purchases from foreign sellers.

    Handheld connections prefered

    A standout characteristic of cross-border shopping in Asia-Pacific is the high level of mobile usage.

    Digital buyers in China and India were more likely to place orders on foreign websites through smartphones and tablets than through a desktop computer.

    The Asia-Pacific Cross-Border B2C E-Commerce 2018 report covers online retail imports and exports in 10 nations within Asia Pacific.

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  • Positive result from anti-plastic campaigns by Starbucks, 7-Eleven

    Positive result from anti-plastic campaigns by Starbucks, 7-Eleven

    Starbucks Korea and 7-Eleven Thailand have announced positive results for their respective anti-plastic campaigns. A report revealed that the local Starbucks subsidiary has seen consumption of single-use straws cut by half in the months since introducing strawless lids on drinks without whipped cream or that do not need stirring. The initiative, introduced last November, has resulted in the monthly average of 15 million straws used across its coffee chain stores drop to 7.5 million per month. The company now only provides straws to customers who request them.

    Aiming to further reduce straw usage by up to 70 per cent, Starbucks Korea is planning an online event to offer rewards to customers who upload pictures of drinks taken without using straws. It has also introduced paper straws for usage in some beverages.

    7-Eleven saves 169 million bags

    Meanwhile, in Thailand, more than 169 million plastic bags have remained unused over the past two months at 7-Eleven stores, according to a report in local news site The Thaiger, the result of a management initiative to phase out their use. The move, which has been supported by local celebrities, encourages shoppers to refuse plastic bags or bring reusable bags to the store.

    The reductions are reported to have saved the chain more than 33 million baht, which operator CP All Public Company will donate to a local hospital.

    All about perception?

    Despite these reports, there have been growing concerns among critics in the media regarding the perceived environmental benefits of similar plastics initiatives worldwide.

    The sippy cup lid adopted in Korea is identical to the design used in North American stores, which was shown in a Reason magazine report last year to use more plastic than the previous lid design and straw put together.

    Plastic shopping bag initiatives similar to the one adopted by 7-Eleven have provoked skepticism among observers who point out that of all single-use plastic packaging used throughout supermarkets and convenience stores, the shopping bag is the only item that tends to be reused in the home.

    A 2017 report in Australia’s journalism hub The Conversation called getting rid of plastic bags a windfall for supermarkets without much perceptible benefit to the environment. It reasoned that most alternatives that were recyclable ended up in landfills anyway.

  • Ralph Lauren showing good progress

    Ralph Lauren showing good progress

    After a long run of fairly mediocre performance, Ralph Lauren has finally delivered a solid set of numbers. The 5 per cent net revenue growth announced last week is pleasing as are the various regional outcomes. These were supported by a respectable increase in underlying comparable sales. It would be remiss not to note that the good figures have been delivered off the back of a very weak prior year performance, but this should not take away from the fact that the brand is now headed in the right direction.

    Away from the top line, the bottom line has also strengthened with operating income up by 12.9 per cent over last year. Much of this is down to far lower rates of discounting, especially in the wholesale channel. We also see this as a sign that Ralph Lauren’s more disciplined and focused approach to producing collections is allowing more product to be sold through at a fuller price. All of this suggests that the company is doing a much better job at connecting with consumers.

    Our own data backs this up. Brand affinity to Ralph Lauren was the strongest in over five years this holiday season; brand recall and awareness were also higher, including among younger consumers. Some of this is the result of increased marketing spend but a lot of it also comes down to a more targeted approach. Initiatives like the launch of the Palace label have provided the brand with greater visibility among consumers looking for edgier, contemporary designs. There is clearly more work to be done, but this progress represents a good platform on which to build.

    That said, Ralph Lauren needs to remain disciplined; it should not revert to past form by launching rafts of sub-brands and spin-off labels which create confusion.

    Digital was the star channel this quarter with sales up by 20 per cent over the prior year. Some of this is a consequence of the investment in online platforms which are now much improved and delivering higher conversion. However, traffic to websites has also risen as Ralph Lauren has created more visibility around its products and brands. In North America, the slight downside is the imbalance in growth. Online comparable sales rose by 21 per cent, but store comparables were flat. While this is not necessarily surprising, it underlines that Ralph Lauren has more work to do in persuading customers to visit its shops – something that should, in theory, become easier as it pulls back from the wholesale channel.

    For all of this positivity, we are still cautious about the trajectory of the brand. While there is no doubt that Ralph Lauren is now in a much stronger position, a lot of work remains to be done on carefully defining the various parts of the offer and ensuring they remain targeted.

    Because of the vast array of brand elements, this is a challenging task that could easily falter – especially as the economy tightens and the company laps some tougher comparatives.

    Overall, however, Ralph Lauren is on the right track, it just needs to stay on course as it accelerates.

  • Mercedes back in No. 4 spot on E-class sales in Korea

    Mercedes back in No. 4 spot on E-class sales in Korea

    Mercedes-Benz outsold local carmakers in Korea to finish fourth in domestic sales in January, industry data showed Monday. The Korean unit of the German automaker sold 5,796 vehicles last month, equal to 4 percent of the total 114,632 vehicles. The sum places it fourth after Hyundai Motor (31.2 percent), Kia Motors (22.8 percent) and SsangYong Motor (6.1 percent).

    January sales for Mercedes-Benz Korea shrank 22.8 percent compared with the month before, but they were still higher than the monthly sales by Renault Samsung Motors (3.5 percent) and GM Korea (3.1 percent).

    The last time that the German brand reached No. 4 in monthly sales was back in April last year, a ranking that followed the closure of a local assembly plant by GM Korea two months earlier. Mercedes-Benz defended the ranking for three months before slipping to No. 6 in May last year.

    In yearly sales, Mercedes-Benz Korea sold 70,798 units for a market share of 4.5 percent last year, behind Renault Samsung (5.7 percent) and GM Korea (5.5 percent).

    Industry watchers attribute the sales increase to the success of the E-Class. January sales of the lineup were the 12th highest at 3,392 units, a number meaning that one E-Class vehicle was sold for every three Grandeur autos from Hyundai Motor purchased.

    The E-Class cars outsold Genesis, an independent brand launched by Hyundai that is pitted as its domestic rival, last year.

    The “diesel-gate” scandal that pounded German brands also helped promote the E-Class, which are mostly gasoline cars,

    “This year, BMW and Audi are scheduled to release new sedans, and a full-change Genesis G80 is also due soon,” one source noted. “This will likely affect the sales of the E-Class.”

  • H&M profit drops due to online investment

    H&M profit drops due to online investment

    H&M profit dropped in the year to November 30, the Swedish fast-fashion retailer blaming investment in its online business for the decline. The world’s second largest clothing retailer embarked on a transformation program last year, investing heavily in logistics and digital technology aiming to improve the shopping experience and product range. This included an upgrade in its mobile app, faster deliveries and the rollout of click-and-collect.

    The company is also working on a new H&M concept store.

    In the last three months of its financial year, the company spent around US$48.5 million on logistics and technology, including resolving problems it flagged earlier last year.

    H&M CEO Karl-Johan Persson said the upgrade in the company’s logistics systems inevitably resulted in increased costs but will lead to a range of improvements for customers.

    “Against a backdrop of rapid changes in the fashion industry, in 2018 we accelerated our transformation to future proof our business, ending a challenging year for the H&M Group and the sector with strong signals that we are on track,” he said.

    Persson said it may have been a challenging year for H&M and the industry but after a difficult first half, there were signs the company’s transformation efforts were beginning to take effect.

    H&M posted a 5 per cent increase in full-year revenue to $22.7 billion, while in local currencies, net sales rose by 3 per cent. Profit fell by 21.8 per cent to $1.36 billion from the same period last year.

    Online sales rose 22 per cent to SEK 30 billion ($3.2 billion) and now comprise 14.5 per cent of the company’s total revenue.

    “With a stronger customer offering and the ongoing improvements in buying and logistics, we expect this trend to continue,” Persson said.

    “While this performance is still some way off the targets that we set at the beginning of 2018, these positive signals confirm we’re making progress across all our strategic focus areas: to create the best customer offering; a fast, efficient and flexible product flow; a stable scalable tech foundation; and adding new growth through store and online expansion.”

    According to Persson, the company opened three new fulfilment centres in the fourth quarter with a total of around 230,000sqm so it can offer customers faster deliveries and a wider assortment while reducing the capacity constraints that slowed them down in some markets in 2018.

    “We have also completed our online transition with investments in 2018, enabling us to successfully migrate online in Germany to the new platform earlier in January 2019,” he said. “With this, all H&M online markets are now on the new platform.”

    Persson said the difficulties with the logistics upgrade in some of their markets earlier in 2018 led to additional costs in the fourth quarter.

    “Applying lessons learned, we have not increased investments to secure upcoming transitions.”

    He added that while these initiatives have a short-term impact on margin, they will lead to continued improvements for their customers, driving increased profitability in the long term.

    “With the transformation now underway, capital expenditure will reduce this year compared to last and we will continue to shift the balance of our investments towards digital.

    “Changing consumer behaviour and technological innovation will continue to transform how and when people shop, we are building a business with the flexibility to respond to this constant evolution.”

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  • Courts Asia continues negative trend as Malaysian sales tank

    Courts Asia continues negative trend as Malaysian sales tank

    Takeover target Courts Asia had a forgettable third quarter, reporting a net loss of S$171,000 – a stark contrast to the $3.51 million profit for the same period a year earlier. The company blamed lower sales and gross-profit margins together with higher income tax expenses.

    Group sales fell 6.2 per cent to $175.3 million, largely due to a 22.2 per cent decline in Malaysian sales measured in ringgit with lower consumer demand for goods and services.  Singapore sales, which account for three-quarters of the business’ overall sales, slipped a negligible 0.7 per cent, while the company’s Indonesian woes continued. Although the market accounts for just 3.4 per cent of Courts Asia’s sales, revenue fell 7.3 per cent in local currency. Courts Asia is already taking steps to stem losses in Indonesia, recently announcing the closure of one of its megastores and the downsizing of another.

    Japanese electronics retailer Nojima Corp lodged a takeover bid for Courts Asia last month, conditional only on the formal acceptance by Courts Asia’s majority shareholder  Singapore Retail Group, which has already indicated its acceptance. The Japanese company plans a strategic review of the business and will consider delisting it.

    Meanwhile, Courts Asia says it will continue to endeavour to improve efficiencies in its Malaysian business to improve productivity and return to profit. Twelve underperforming stores have already been closed reducing the network to 54.

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  • Korea automobile production falls for 3rd year in 2018

    Korea automobile production falls for 3rd year in 2018

    Korea’s auto production tumbled for a third consecutive year in 2018 amid weaker domestic and global demand, data showed Sunday. According to the data by the Korea Automobile Manufacturers Association (KAMA), Korea produced 4.03 million vehicles last year, down 2.1 percent from the previous year. The figure has been decreasing over the past three years from 4.56 million in 2015 to 4.23 million in 2016 and 4.12 in 2017.

    The 2018 figure put Korea as the seventh-largest car manufacturing country in the world, down one notch from the previous year, according to the association.

    Korea became the world’s fifth-largest maker of cars in 2005 and retained the ranking until 2015. But India edged out Korea to stand at the world’s sixth in 2016 and 2017. Last year, Korea fell behind Mexico.

    China was found to produce the largest number of vehicles in 2018, with 27.81 million followed by the United States, Japan, Germany and India.

    Korea’s total car exports also fell to 2.45 million vehicles last year from the previous year’s 2.53 million, the KAMA said, adding that the country accounted for 4.1 percent of the world’s car production in 2018, down 0.1 percentage point from a year earlier.

    “Contentious labor-management relations, as well as stiff labor market conditions, among others, appear to negatively affect local carmakers’ competitiveness,” the association said in a release, calling for state support and business innovation.

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  • Asia-Pacific boosts Estee Lauder revenue

    Asia-Pacific boosts Estee Lauder revenue

    Estee Lauder Asia-Pacific sales achieved double-digit growth in the December quarter. The beauty giant says the growth was broadbased, with nearly half of the markets in the region growing by double digits. “China, Hong Kong and Japan continued to deliver strong growth, and Korea net sales accelerated. Prestige beauty in China accelerated and the company continued to build share,” the company said in a statement.

    “[We] generated double-digit net sales growth in virtually every major product category and channel. Operating income increased, primarily due to higher net sales.”

    Globally, Estee Lauder sales exceeded US$4 billion for the first time, up 7 per cent from the same time a year earlier. Net earnings rose to $573 million compared with $123 million last year.

    “We delivered an excellent performance in our fiscal second quarter,” said president and CEO Fabrizio Freda. “Importantly, this was our eighth consecutive quarter of impressive net sales growth that met or exceeded our long-term goal, all while navigating many global macro issues.

    “Our sustained progress is the result of our multiple engines of growth strategy, and demonstrates our agility in moving resources to the best global opportunities,” he said.

    The strongest growth engines during the quarter included the skin care category globally, the Estee Lauder Asia-Pacific business, online and travel retail channels, and most brands, including Estee Lauder, La Mer, Mac and the company’s artisanal fragrance brands.

    “Despite a volatile and challenging backdrop, we are optimistic about our company’s long-term outlook. We are very well-positioned to build share in global prestige beauty,” Freda said.

    “We plan to increase our investments during the next six months behind our successful innovations, high-quality products, compelling digital advertising and effective commercial execution, while also enhancing our capabilities to strengthen our industry leadership and deliver long-term profitable growth.”

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  • Time for China’s smartphone brands to bloom

    Time for China’s smartphone brands to bloom

    Like many urban Chinese consumers, Shenzhen civil servant Gao Jian has had a long-held belief that the quality of domestic smartphone brands paled in comparison with foreign brands, especially Apple. But in December, Gao joined the growing number of mainland consumers who have made the switch from Apple’s iPhone to a premium Android smartphone from a major Chinese brand. He bought a Mate 20 Pro, the flagship model from the country’s largest smartphone supplier Huawei Technologies.

    “Its design and cameras are better than what I expected,” Gao said. “Also, iPhones have become increasingly unaffordable.”

    His experience reflects the broader success of the Chinese mobile phone industry in smashing people’s perception that domestic suppliers are only good for inexpensive, low-quality products.

    That stereotype has beset many Chinese brands in the home appliances, consumer electronics, personal computer, car and mobile phone markets, where products from more established brands in the US, Japan or Europe were preferred by mainland consumers for many years.

    But brands like Haier Group Corp, Lenovo Group and, more recently, Huawei, have expanded their operations, increased research and development, and made advanced products to change that impression around the world.

    China is now home to some of the most successful smartphone brands, which rival the likes of Samsung Electronics, Apple and LG Electronics.

    Shenzhen-based Huawei, the top global supplier of telecommunications network equipment, was ranked the world’s second biggest smartphone vendor – behind Samsung and ahead of Apple – for the second consecutive quarter in the three months ended September 30, according to research firm IDC. Xiaomi Corp and Oppo took the No 4 and 5 spots in the same quarter.

    The emergence of Chinese smartphone brands on the global stage has mirrored the rising competitiveness of the country’s telecoms network equipment suppliers, which have won market share with value-for-money offerings as well as on heavy investments in research and development.

    The gains have also sparked increasing pushback by the US, which is persuading its allies to boycott Chinese telecoms gear suppliers such as Huawei on grounds of national security.

    With the world’s biggest internet population and smartphone market, China had as many as 300 domestic mobile phone companies about three years ago. Cutthroat competition reduced that number to about 200 last year, as Chinese consumers bought fewer smartphones and the economy grew at a slower pace.

  • The Shoppes at Marina Bay Sands hit record high in 2018

    The Shoppes at Marina Bay Sands hit record high in 2018

    The Shoppes at Marina Bay Sands has capped its most successful year ever, breaking revenue records in 2018 and strengthening its leading position as the luxury shopping destination in Singapore. The luxury mall, which enjoys an occupancy of 95.4%, rang in a record mall revenue of US$179 million last year, a 7 per cent rise against the same period in 2017 – by far its best performance since opening. In 2018, retail tenant sales at The Shoppes jumped 19 per cent to US$1,898 per square foot from the preceding year.

    The Shoppes also kept its top position in tourism shopping, capping a record year to represent an estimated 25 per cent of the tax-free tourist market in Singapore. This is based on industry metrics that track tax-refunded tourist receipts.

    John Postle, Senior Vice President of Retail, Marina Bay Sands, said, “2018 has been an exceptional year for the mall, as we not only achieved our highest sales revenue in history, but also solidified a leading position in tourism shopping. This is so rewarding, given the competitive retail landscape and growth of online shopping.”
    The performance is also the result of an ongoing retail remix strategy that started in 2012, which saw the mall double its footprint with luxury brands in the form of duplexes, as well as expansion into luxury childrenswear.

    This strategy, coupled with attractive programming such as late-night shopping, in-store exclusives, and one of the most generous loyalty programmes in Singapore, has resulted in 120,000 shoppers walking through the doors of the mall daily. This includes locals as well as its biggest tourism markets of China, Indonesia and Japan.

    Jan Moller, Country Managing Director, Singapore & APAC Sales, Global Blue, said, “As one of Asia’s leading shopping destinations, The Shoppes at Marina Bay Sands continues to outperform other luxury malls in Singapore to own the greatest share of inbound tourist spend in the luxury sector in 2018.”

  • Chinese demand for skincare products boosts sales of French cosmetics company L’Oreal

    Chinese demand for skincare products boosts sales of French cosmetics company L’Oreal

    Strong Chinese demand for luxury skin creams helped Lancome owner L’Oreal beat sales forecasts in the fourth quarter, as did a pickup in its lagging mass market division. Like rivals including US-based Estee Lauder, the French maker of Maybelline and Urban Decay make-up has thrived on strong demand from Chinese shoppers in recent years, especially for its higher-end products.

    Sales of L’Oreal’s top-flight brands exceeded analyst expectations in the last three months of the year thanks to this market, despite cooling economic growth in China, and fears over a Washington-Beijing trade war.

    Some heavy-hitters in the luxury fashion industry, such as LVMH’s Louis Vuitton, have also reported encouraging momentum in Asia. At L’Oreal Asia-Pacific overtook North America as its biggest region last year.

    But L’Oreal, which is due to detail its results at a news conference on Friday, also faces a challenge to keep improving revenue growth in other areas, including its consumer products unit, home to brands like Garnier shampoo.

    Sales rose 2.8 per cent in that division on a like-for-like basis in the fourth quarter, which strips out currency effects and acquisitions, up from 2.3 per cent a quarter earlier.

    That helped boost overall sales at the firm, up 7.7 per cent like-for-like and head of forecasts for a 6.4 per cent rise, and which came in at 7.1 billion euros ($8.1 billion).

    Yet the mass market segment still slightly lags the performance of peers like Nivea-maker Beiersdorf and Dove soap owner Unilever.

    L’Oreal said it was also facing a sluggish market in France and the United Kingdom.

    While the latter only makes up around 3 per cent of sales, the company has joined others in preparing for Britain’s potentially chaotic exit from the European Union, and has started stockpiling cosmetics.

    The company said it still expected to outperform the broader beauty market in 2019, though the tone of its outlook was a tad less bullish than last year, forecasting “growth in both sales and profits” rather than “significant growth”.

    For 2018 as a whole, the company’s operating profit rose 5.3 per cent to 4.7 billion euros, giving a margin of 18.3 per cent of sales, up from 18 per cent at the end of 2017.

    One of L’Oreal’s biggest shareholders with a 23 per cent stake, Switzerland’s Nestle, has come under pressure from an activist investor to sell off its stake in the French cosmetics firm. The firms have yet to signal whether such a move was in view.

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  • The shares of Lululemon athletica have risen 90% in 2018

    The shares of Lululemon athletica have risen 90% in 2018

    Over the past 12 months, shares of lululemon athletica have risen 90%. The most recent surge came after an upgrade on 2018 holiday season guidance, helping the athletic-wear stock rebound from a slump brought on by a broad stock market sell-off at the end of the year. Lululemon has enjoyed several tailwinds. Athleisure (that is, activewear and sports-inspired clothing for all situations) has continued to grow in popularity, and consumers have been generously spending — to the tune of 4.9% more on clothing alone in 2018, according to the U.S. Census Bureau. After a blockbuster run, though, Lululemon may have a difficult time repeating that same success in the new year.

    It is easy to see why shares of the clothing company have come roaring back. During the all-important holiday shopping season, management updated revenue guidance to between $1.14 billion and $1.15 billion, up from previous guidance of $1.12 billion. Earnings per share also got an upgrade to a range of $1.72 to $1.74, up from a range of $1.64 to $1.67.

    The results are impressive, but Lululemon has been measured by how it approaches expansion. Through the third quarter of 2018, there were 426 physical stores, up a net 22 from the start of the year. Instead of growing primarily by new openings, the company has instead benefited from a surge in same-store sales at existing stores — which increased 6% during the third quarter — as well as directing traffic to the online store. Direct-to-consumer sales were 25.3% of revenue in the third quarter, compared with 21.2% in the same period in 2017.

    Lululemon is not alone in the athleisure-wear category, though. Gap and its Old Navy and Athleta brands continue to grow their presence in sportswear, and the largest sports-only chain, Dick’s Sporting Goods, has also launched its own branded lines of clothing. Yet in spite of the competition, Lululemon has continued to resonate with new and existing buyers, both here in the states and abroad.

    The maker of stretchy pants and other sports-inspired clothing could nevertheless continue to run higher. After all, Lululemon has momentum on its side, both on the top and bottom lines. Even should sales growth take a breather, management has said it thinks gross profit margin on product sold could continue to expand, especially as a result of the emphasis on direct selling online and new higher-margin products such as coats and sweaters.

    On the other hand, there is reason for investors to give pause before jumping on the bandwagon. Even after earnings nearly doubled in 2018, the stock still trades at a premium, largely because share performance matched that of earnings. The trailing-12-month price-to-earnings (P/E) ratio currently sits at 52.5, a metric that only slightly improves to 43.2 when using free cash flow — a better measure of profitability, as it factors only for basic operating expenses and capital expenditures and excludes items such as depreciation and amortization.

    On a one-year forward basis, the P/E is currently at 40. Paying for decades’ worth of profits that haven’t yet been realized only makes sense if the bottom line continues to expand at breakneck speeds, and that’s what is implied in the rich valuation. Thus, there’s little room for error, and if there’s any slowdown at Lululemon, the stock could suffer losses at current levels.

    Of course, for those looking to the long term, Lululemon looks like a solid bet on the apparel industry of the future. Nevertheless, after renewed investor optimism over new fourth-quarter guidance, the stock is too rich for my taste.

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