Lululemon Jumps After Raising Its Full-Year Profit Outlook

Lululemon Athletica Inc. raised its profit outlook for the full year while also beating market expectations for earnings in the first quarter, driving shares up in extended trading.

The yogawear brand now sees earnings per share totalling as much as $14.47 in the current fiscal year, up 27 cents from the previous view and above the average analyst estimate. Profit in the fiscal first quarter, which ended April 28, was also higher than expected. Lululemon maintained its full-year sales guidance at as much as $10.8 billion.

Sales were largely in line with expectations. First-quarter comparable sales were flat in the Americas, while they rose 25 percent in the international segment — continuing the company’s trend of faster growth in markets such as China while the US cools off.

US consumers are “still spending, but I think they’re being selective of where they spend and what they choose to buy,” Chief executive officer Calvin McDonald said in an interview. He attributed the higher earnings outlook to better sales of more profitable items. The company, which also announced a $1 billion increase to its stock buyback programme on Wednesday, has added new colours to its merchandise assortment and said its smaller sizes have helped drive demand.

The shares jumped 11 percent at 16:14 PM in extended trading in New York. The stock has declined 40 percent this year through Wednesday’s close.

Lululemon has posted strong sales in recent years despite struggles at many US apparel companies as shoppers shifted to more casual outfits during the pandemic. But concerns over slowing growth materialised after the company reported declining foot traffic to Lululemon’s US stores.

Investor worries heightened in May when Lululemon’s product chief Sun Choe departed the company for the top role at Vans, VF Corp.’s ailing skateboarding footwear and apparel brand. She won’t be replaced and her responsibilities have been reassigned to the company’s creative director. McDonald said there’s no additional realignment planned among senior management.

“This was our planned succession,” he said. “This is a permanent structure, not interim.”

By Kim Bhasin

Learn more:

Lululemon Is at a Crossroads

When the company reports earnings today, analysts expect another quarter of slowing growth. The question is whether Lululemon’s ongoing slowdown is temporary or a sign that the brand is trapped in a downward spiral.

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