Lululemon shares exploded Thursday after the company raised its full-year forecast and posted better-than-expected third-quarter profits.
The yoga-apparel company’s net income declined 8.5% to $US60.5 million, or 42 cents a share, in the third quarter ending Nov. 2. Analysts had expected 38 cents a share.
The company now expects per-share profit this year of $US1.74 to $US1.78, up from its previous forecast of $US1.72 to $US1.77 per share.
Lululemon’s shares were up as much as 10% Thursday morning.
But the earnings report wasn’t all good news.
The company also trimmed its full-year sales target, citing delayed store openings and a lower Canadian dollar.
In the third quarter, comparable store sales decreased by 3%, while direct-to-consumer revenue increased 27%.
Analysts have expressed concerns that Lululemon has alienated some of its most loyal customers following a string of quality issues with its yoga pants.
“Many customers have left and it’s hard to get them back, especially given the focus on the women’s active apparel business from brands such as Nike and Under Armour, and retailers such as Athleta, Sweaty Betty, Victoria’s Secret, and others which have bitten into LULU,” Sterne Agee analyst Sam Poser wrote in a research note last month.
But others have faith that the company will make a comeback.
“Lululemon is one of the most attractive growth stories in retail, in our view, helped by the tailwind in athletic apparel,” Wells Fargo analyst Paul Lejuez wrote in a Dec. 9 research note cited by Bloomberg.
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