Lululemon shares are surging after earnings beat expectations

Lululemon is surging after it reported better-than-expected earnings though the company did provide weak guidance for the first quarter.

The stock rose by more than 7% to north of $US65 per share in early afternoon trading.

Earlier on Thursday, the yoga pants and athletic wear maker reported its fourth quarter earnings. Net revenues increased 16% to $US602.5 million from $US521.0 million in the previous period. Comparable store sales rose by 5% on a constant dollar basis, and direct to consumer net revenue increased 20% on a constant dollar basis.

“Our solid performance in the fourth quarter builds on the momentum that began in the third quarter and reflects improved traffic and a strong guest response,” CEO Laurent Potdevin said in the earnings release.

But its forward guidance was weaker than investors expected.

Lululemon now expects revenues to fall between $US413 million and $US418 million in the first quarter, based on “a total comparable sales increase in the low single digits on a constant dollar basis.” Analysts had estimated $US442 million, according to Reuters.

It forecast earnings of $US0.31-$US0.33 per share for the first quarter, versus analysts’ estimates of $US0.39.

Paul Lejuez at Wells Fargo, who rates the stock “Outperform,” explains why the firm is still optimistic about the company (via TheStreet):

“Overall, Q4 was slightly better than what the company guided to in January, and while guidance for a low single digit comp increase in Q1 is a little light, we believe it is likely impacted by port delays/inventory issues (as annual comp guidance is for a mid-single digit comp increase). Considering this is the first guidance issued with new CFO Stuart Haselden in the role, we also believe there is some conservatism built in. We continue to believe that the strength in the athletic category creates a tailwind for LULU and others for years to come. With LULU’s results improving even before the company has fully fixed the product, we expect comp momentum to continue.”

Here’s the jump in trading on Thursday:

NOW WATCH: Here’s How $US98 Lululemon Yoga Pants Compare To Cheaper Alternatives

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