Lululemon Raises Annual Forecast as Results Beat Projections

12/06/17 04:46 PM EST
   By Maria Armental 
 

Lululemon Athletica Inc., best known for its yoga clothing, again raised its forecast for the year, citing momentum in sales as it entered the holiday season.

The Vancouver athletic-apparel company, a leader in the so-called athleisure market, on Wednesday said it now expects to earn $2.20 a share to $2.23 a share on $2.59 billion to $2.61 billion in sales for the year that ends Jan. 28. Excluding costs tied to the restructuring of girls brand ivivva, Lululemon said it expected to earn $2.45 a share to $2.48 a share.

Lululemon, which targets $4 billion in sales by 2020, had forecast per-share earnings at $2.04 to $2.11, or $2.35 to $2.42 on an adjusted basis, on $2.55 billion to $2.6 billion in sales.

Comparable sales, a closely watched measure of underlying sales performance, are now expected to improve in the mid-single digits, up from its previous view of a percentage increase in the low-single digits on a constant dollar basis. Analysts surveyed by FactSet expect a 4% improvement, compared with last year's 7% increase.

The company's board also approved spending up to $200 million to buy back stock.

Shares, up 4% this year, rose 6% to $72.05 in after-hours trading on the revised outlook and higher-than-expected results for the third quarter.

The favorable outlook caps a year that began with a fashion misstep--company officials blamed its first quarterly comparable-sales decline in more than two years on spring offerings that weren't bold enough--and during which several notable executives have left, including creative director Lee Holman, who gave notice last month that he would leave on Dec. 31. In addition, Nike Inc. started to open "pant studios," intensifying competition for Lululemon.

Meanwhile, Lululemon is looking for growth in menswear, which it expects to account for at least of one-quarter of annual sales by 2020, and footwear, which it sells in partnership with niche sneaker house Athletic Propulsion Labs.

Overall, Lululemon's third-quarter profit narrowed 14% to $58.9 million, or 43 cents a share. Excluding restructuring costs and other items, profit rose to 56 cents a share from 47 cents a share a year earlier.

Sales rose 14% to $619 million with overall comparable sales improving 8%, or 7% on a constant dollar basis.

Lululemon had projected a profit of 33 cents to 35 cents a share, or 50 cents to 52 cents on an adjusted basis, on $605 million to $615 million in sales with comparable sales increasing in the mid-single digits on a constant dollar basis.

Gross profit margin, the percentage of sales the retailer makes after accounting for production costs, improved to 52% from 51.1% a year earlier.

 

Write to Maria Armental at maria.armental@wsj.com

 

(END) Dow Jones Newswires

December 06, 2017 16:46 ET (21:46 GMT)

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