Lululemon Rises Most in Three Months After Defying Athletic Woes

  • Total comparable sales grew 7 percent in second quarter
  • Company on track for $4 billion in revenue by 2020, CEO says

Why Lululemon Is Rising the Most in Three Months

Lululemon Athletica Inc. kicked off its biggest rally in three months after reassuring investors that it remains a bright spot in a moribund athletic-apparel market.

Improved marketing, a push overseas and a deeper reliance on e-commerce are all fueling growth at the yogawear brand. The company’s second-quarter profit and sales topped analysts’ estimates, and it delivered a forecast for the year that beat projections.

The upbeat results follow disappointing quarterly reports from sporting-goods companies like Finish Line Inc., which stoked investor fears that the athletic industry is flagging. Lululemon Chief Executive Officer Laurent Potdevin is working to diversify the yogawear maker’s offerings in a crowded marketplace. He’s also trying to appeal to more men and adding technical innovation to the clothing.

“The acceleration that we have seen across the business in the second quarter enables us to take another positive step on our path towards achieving $4 billion in revenue by 2020,” Potdevin said in a statement.

The stock rose as much as 7 percent to $61.60 in New York on Friday. It had fallen 11 percent this year through Thursday’s close, hurt in part by broader fears that the athletic industry was faltering.

Comparable-store sales including e-commerce, a closely watched metric, rose 7 percent in the quarter -- more than the 4 percent increase forecast by analysts, according to Consensus Metrix.

Excluding some items, second-quarter profit was 39 cents a share. That topped the 35 cents projected by analysts.

Children’s Line

To focus on its core operations, Lululemon said in June it will restructure its kids business, Ivivva. The company plans to close 40 of its 55 Ivivva shops and convert half of the rest to Lululemon-branded stores, making the kids line primarily e-commerce focused.

Sales in the quarter increased 13 percent to $581.1 million, compared with the $567.1 million analysts predicted. The retailer boosted its full fiscal-year revenue forecast to between $2.55 billion and $2.6 billion from a range of $2.53 billion to $2.58 billion previously.

Lululemon said full-year profit, excluding some items, will be $2.35 to $2.42 a share. That topped analysts’ projections.

    Before it's here, it's on the Bloomberg Terminal.