Lululemon shares surge following Q4 forecast boost
Lululemon Athletica Inc. rose the most in more than four months after the yogawear company boosted its quarterly sales and profit forecast ahead of the ICR Conference in Orlando this week. The move follows a series of holiday sales misses last week and prompted a chorus of praise from analysts.
“In what is turning out to be a more mixed holiday for retailers, we view these results as industry leading,” a MKM Partners analyst wrote.
The company said comparablestore sales increased in the highsingle to low-double digits for the current quarter, which ends Feb. 3. Lululemon also sees total sales and adjusted profit coming in higher than its previous forecasts. The forecast comes about a month after the Vancouver-based company reported a surge in online traffic in the third quarter and registered a 76-per-cent jump in its e-commerce business in China. Chief executive officer Calvin McDonald, who has upped investment in China and in December identified Asia as a key growth driver, said the outlook revisions reflected “success around the globe.”
The company ’s shares, up 12 per cent in the past six months, gained 5.73 per cent to US$139.73 on the day in New York.
The key holiday shopping season during November and December is important for retailers as they record a significant portion of their annual sales, both in-store and online, during the period. Lululemon, which popularized “athleisure wear” by turning pricey women’s yoga wear into mainstream fashion, now expects revenue in the range of US$1.14 billion to US$1.15 billion in the fourth quarter compared with its previous forecast of US$1.12 billion to US$1.13 billion.
The chain, which has seen strong same store growth in the past few quarters, raised its earnings forecast to between US$1.72 and US$1.74 per share, from a previous profit estimate of US$1.64 to US$1.67 per share. Analysts on average had estimated the company would report a profit of US$1.69 per share for the quarter, according to IBES data from Refinitiv. Susquehanna analyst Sam Poser, in a note on Jan. 8, said the trade war between the United States and China will not have a major impact on Lululemon, U.S.-based apparel maker V.F. Corp and Canadian luxury apparel company Canada Goose Holdings Ltd.
“Each company is underpenetrated in China and has a great deal of white space there. We are confident that innovation and brand strength will provide a long runway for growth in China and other geographies,” Poser said.