Lululemon testing loyalty program, profits increase to US$94.4 million in Q3

VANCOUVER — The head of Lululemon Athletica Inc. says the company has seen a strong response to an Edmonton pilot of its first loyalty program.

"The response was very strong, and exceeded our expectations," said company CEO Calvin McDonald on an earnings conference call Thursday.

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The annual loyalty program costs $128 to join with the member receiving either a pair of pants or shorts designed for the program, as well as expedited shipping on e-commerce purchases and access to monthly sweat classes and curated events.

The company will continue piloting the program through the first half of next year with some expansions outside of Edmonton, said McDonald, who stepped into the CEO role in August.

"We have a few additional markets that we're going to be launching in, and [we're] very excited as we look forward to the ability to have a membership-based program where it's driving loyalty, but guests are seeing value in this curation of services and content beyond just our product."

The loyalty program experiment comes as the company also continues to expand its store base with the opening of 38 net new locations since the third quarter of last year. Locations include 14 in the U.S., 11 in Asia, seven in Europe, four in Canada, and two in Australia/New Zealand.

The added stores helped boost net revenue by 21 per cent to US$747.7 million in the third quarter. The net revenue was partially offset by a US$9.3 million loss on the foreign exchange rate and the closure of 48 of its Ivivva brand stores.

Net income surged 60 per cent to US$94.4 million, up from the US$58.9 million the year before.

The Vancouver-based apparel company said its earnings per diluted share amounted to 71 cents per share, compared to 43 cents per share in the third quarter of 2017.

According analysts polled by Thomson Reuters Eikon, Lululemon was expected to earn $92.5 million profit or 69 cents per share.

Meanwhile the company's e-commerce efforts netted US$476.9 million in sales, compared to US$425.1 million the year before.

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