Lululemon Gains as Online Sales Spur Higher Annual Forecast

Lululemon Athletica Inc. gained the most in three months after the Canadian yoga-wear retailer boosted its annual profit and sales forecasts, helped by strength in its online business and store openings.

The shares rose 7.3 percent to $73.57 at the close in New York, the biggest one-day gain since Sept. 7. The Vancouver-based company has gained 58 percent this year.

Lululemon has been pursuing growth overseas, setting up the groundwork for stores in Hong Kong, London and Germany, Chief Executive Officer Christine Day said in an earnings call today. The 201-store company has more than doubled revenue in its e-commerce business in the past three quarters to $119 million from $56 million, while sales at company-owned locations have jumped 36 percent to $712.1 million, Lululemon said in its quarterly filing today.

Lululemon “remains one of the key brands that is building awareness, driving share, and selling product at full price in a sea of price competition,” Adrienne Tennant, an analyst at Janney Montgomery Scott LLC with a buy rating on the stock, wrote in a note today. The company “remains an attractive longer term growth story, and we believe earnings growth is still above 30 percent annually for the next several years,” she wrote.

Profit this fiscal year will be as much as $1.83 a share, up from a previous forecast of a maximum of $1.81 a share, Lululemon said in a statement today. Analysts’ projected $1.81, the average of estimates compiled by Bloomberg.

New Stores

Lululemon has opened 21 stores in the U.S., eight in Australia and two in New Zealand since last year, as well as five Canadian locations for ivivva athletica, which makes dance-inspired apparel for young people, according to today’s filing.

Day, who ran Starbucks Corp.’s Asia-Pacific unit before joining Lululemon, said the retailer is also looking to boost its men’s business, which is typically about 12 percent of sales.

The retailer, which sells yoga pants for $98 to a loyal customer base, has faced growing competition from stores such as Gap Inc.’s Athleta and VF Corp.’s Lucy. It also faced issues from color bleeding in some garments earlier this year.

Lululemon reported third-quarter profit of 39 cents a share, topping analysts’ estimates in a Bloomberg survey for 37 cents each. Sales were $316.5 million in the period, an increase of 37 percent.


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