Lululemon's Measured Growth Pays Off

Last Updated Sep 15, 2009 1:06 PM EDT

There aren't a whole lot of good stories coming out of the retail industry right now, but one exception is Lululemon Athletica, a Canada-based women's yoga and running chain that is growing in the United States. The company is performing well in the recession due to a practice of measured store growth.

When many retailers find sales success, they start growing haphazardly. That is not the case with Lululemon. The company filed for its IPO in the summer of 2007, and posted a whopping 30 percent same-store sales gain the following quarter, as well as an 80 percent net revenue spike.

But Lululemon didn't put stores on every corner like Gap Inc. or Starbucks. The retailer only operates 115 stores in North America and is continuing its conservative pace. This year only eight new units are planned, and executives said during their most recent conference call that only 15 stores are on tap next year.

Lululemon is even tempering the launch of a new concept this year, called Ivivva Athletica, geared toward girls between six and 12, which will sell garments for gymnastics, dance, track and other activities. Growth is starting off slowly, though, with three stores opening by the end of the year in Canada, with no further expansion plans yet announced.

"We will not grow faster than our human capital," Christine Day, the company's president and chief executive officer, told TheStreet.com. "The store count isn't what motivates us."

This doesn't mean Lululemon is completely immune to the recession. The retailer reported a two percent same-store sales decline during its second quarter, and net income fell to $9.2 million from $11.1 million during the same year-ago period. But results were better than expected, and the company still posted a 14 percent revenue increase, even though its inventory was low based on conservative prior forecasts.

It's always nice to see a retailer growing instead of closing its doors nowadays. But it's almost better seeing one expand responsibly, hopefully avoiding a future pairing down of its portfolio.