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Lululemon targets revenue growth in low teens over next 5 years, helped by growing men's and online sales

Lauren Thomas
  • Lululemon says it plans to double its men's and online sales over next five years, targeting annual revenue growth in the low teens during that timeframe.
  • The retailer, meantime, plans to quadruple international revenues by 2023.

Lululemon LULU  released a fresh, five-year growth plan on Wednesday ahead of its first investor day five years and the first under new CEO Calvin McDonald.

The sports-bra and leggings maker says it plans to double sales of its men's and online businesses and quadruple international revenues, by 2023. It's targeting annual revenue growth in the low teens over the next five years. And it's now expecting operating income growth to exceed revenue growth each year, with "modest" gross margin expansion, and earnings-per-share growth either equating to or exceeding operating income growth annually.

Analysts and investors are looking to see if McDonald, who joined Lululemon  as CEO in August from cosmetics company Sephora after Laurent Potdevin was ousted amid misconduct allegations, can keep the momentum going at the athletic apparel company.

Lululemon shares were fractionally lower Wednesday morning. They have surged more than 80% over the past 12 months, compared with the S&P 500 Retail ETF's (XRT's) growth of just 1.5%.

"We believe Lululemon has a unique opportunity to push beyond traditional expectations to develop innovative products and become a fully experiential brand that creates compelling experiences for guests," McDonald said in a statement ahead of the meeting.

Key areas of focus at Lululemon of late include the expansion of its men's business, growth overseas in markets like China, shaping a stronger e-commerce platform and building a base of loyal shoppers. One initiative has been its testing of a new loyalty program , where members pay an annual fee for expedited shipping, workout classes and other perks.

Meantime, rivals Nike NKE and Under Armour UAA both have expressed they plan to target female shoppers more with new yoga pants and sports bras, threatening to wade into Lululemon's turf. But Lululemon, in turn, has said its men's business presents the biggest growth opportunity for the brand, moving forward. It's said it's on track to get that business to $1 billion in sales, annually, by 2020. It's also getting into selling personal-care products, like deodorant, searching for other ways to lure shoppers to its stores.

McDonald on Wednesday said Lululemon is also planning to invest more "in creating dynamic experiential moments" for customers. That includes opening a 25,000-square-foot store in Lincoln Park in Chicago this July, which will have yoga studios, meditation spaces, and juice and food options, he said.

In the latest fiscal year, Lululemon's sales amounted to $3.3 billion, with sales at stores open for at least 12 months surging 18%, compared with growth of 7% during the prior year.

Nike, which brought in $36.4 billion in sales globally in 2018, holds 18.3 percent of the overall U.S. sportswear market, which includes apparel and footwear, according to data compiled by Euromonitor. Adidas is second with 6 percent, Under Armour with 4.1 percent, Skechers SKX with 2.6 percent and Lululemon with 1.9 percent as of the end of 2018, according to the firm.

In the women's athletic apparel category, though, Lululemon is just second to Nike, according to data compiled by NPD Group.

Ahead of Wednesday's meeting, a handful of analysts said they believe Lululemon will reach its revenue goal — for $4 billion by next year — ahead of schedule. Nomura Instinet analyst Simeon Siegel believes the retailer's sales can eclipse $6.5 billion by 2023.

"However, it seems either sales or margins are approaching a peak," Siegel said in a note to clients. "It seems more likely [management] works to maintain sales growth at the expense of some margin than vice versa."

This is a developing story. Please check back for updates.

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