Despite Lululemon Athletica (LULU - Get Report) experiencing several years of slowing growth amid increased competition from Nike (NKE - Get Report) and Under Armour (UA - Get Report) in the female athleticwear space, execs still oddly hold a pretty high opinion on its future.
During an investor presentation Wednesday, Lululemon CFO Stuart Haselden said the company plans to double its sales -- and more than than double its earnings -- by the year 2020. That would roughly bring Lululemon to revenue and net profit of $4.6 billion and $600 million, respectively, using results from last year as starting points.
What's more, the company anticipates doubling sales of its women's and men's businesses over that time-frame to about $3 billion and $1 billion, respectively.
What's driving Lululemon's uber-bullishness other than typical executive hubris? Well, the company is keen on the benefits of an improved pipeline of innovative products, opening more stores in key U.S. and overseas markets, expanding the size of existing stores and partaking fully in the digital shopping age.
Unfortunately for Lululemon, it may be hard for investors to buy into such an over-the-top outlook due to multiple factors.
First, the trend has not been a friend to Lululemon. The company's gross and operating profit margin have declined for four consecutive years as its once enviable market share has been encroached on by larger apparel competitors and smaller upstarts.
Further, the company has bore the brunt of internal operating inefficiencies. Same-store sales have risen by mid-single digit percentages in each of the past three years, down from the blistering double-digit percentage gains when it first burst onto the apparel scene in the mid 2000s. In fact, Lululemon barely doubled its revenue in the five years from 2011 to 2015 when it was on fire in the U.S. -- according to Bloomberg data, sales reached $2.03 billion last year compared to $1 billion in 2011.
Meanwhile, Lululemon's present-day performance has been tepid.
The yoga apparel maker reported first-quarter earnings fell 11.8% from the prior year to 30 cents a share excluding one-time items, missing Wall Street forecasts of 31 cents. Total revenue rose 17% to $495 million, narrowly surpassing estimates of $487 million. Comparable-store sales rose 3%, or 5% excluding the influence of the strong dollar. Total comparable-store sales, which include sales online, increased 6% or 8% when stripping out currency fluctuations. Sales online increased 17% in the first quarter from the prior year to $97.6 million.