Lululemon sees rising revenue in China, but slow growth in the US and Canada

The company had 127 stores in China at the start of the year and 438 stores in the US and Canada, according to its annual report.

In contrast, Lululemon reported a sluggish performance in North America, with net income up just 1 percent to $1.7 billion. The region’s share of the company’s total revenue fell to 73 percent from 78 percent a year ago, but remains Lululemon’s largest market.

The company reported same-store sales in the U.S. and Canada fell 3 percent from a year earlier and opened a net new store in the region last quarter.

Lululemon’s strong performance in China comes as the country’s retail trade returns to pockets of the economy, with a 2.7 percent year-on-year increase in retail sales in July that beat expectations. This growth was driven by a resurgence in consumer confidence and spending, particularly online, supported by events such as the 618 Online Shopping Festival.

Lululemon faced backlash in the US market last month after it pulled its new ‘Breezethrough’ leggings from shelves due to customer complaints about the design. Buyers criticized the leggings for their unflattering deep V seam and poor fit.

The launch was a “test and learn” experience, CEO Calvin McDonald said on a call with analysts Thursday. He also said the company plans to reintroduce the material next year.

The “Breezethrough” pants saga was reminiscent of another yoga pants blunder in 2013, where the company’s yoga pants were too bright and led to recalls. But the launch of Breezethrough this year had a less severe impact than the sheer pants, Tom Nikic, an analyst at Wedbush Securities, wrote in a note cited by Bloomberg.

Lululemon’s McDonald also said the Breezethrough issue was “negligible” to the company’s second-quarter performance.

The athleisure company reported total revenue of $2.37 billion in the second quarter, up 7% from the same period last year.