March 27, 2018 / 8:47 PM / 4 months ago

Athletic apparel maker Lululemon shares soar on expectations beat, forecast

TORONTO (Reuters) - Canadian athletic apparel maker Lululemon Athletica (LULU.O) on Tuesday posted a surprisingly strong fourth-quarter profit and forecast further growth in the first quarter, sending its shares surging in after-hours trading.

FILE PHOTO: People walk past a store by yogawear retailer Lululemon Athletica in New York City, U.S., March 30, 2017. REUTERS/Brendan McDermid/File Photo

Strong sales from a revamped e-commerce platform and a surge of traffic at permanent and holiday pop-up stores drove results at the “athleisure” company, which is looking for a new CEO and seeking to fend off competitors such as Nike Inc (NKE.N).

The Vancouver-based company estimated first-quarter earnings of 44 to 46 cents per share on revenue of $612 million to $617 million, driven by an expected rise in comparable sales in the low-double digits. That compares with per-share adjusted earnings of 32 cents on revenue of $520.3 million a year earlier.

The stock jumped 6.5 percent in after-hours trading, following a 2 percent decline during the day to $78.71, after Lululemon reported a 33 percent increase in adjusted earnings and a 290 basis point rise in adjusted operating margins to 27.8 percent.

The gains came as Lululemon navigates changes following the abrupt resignation of Chief Executive Laurent Potdevin last month on undisclosed charges of misconduct.

The company is continuing its CEO search and has had “a number of great candidates,” Chairman Glenn Murphy, who became executive chairman on Potdevin’s departure, said on a teleconference on Tuesday.

Lululemon, which popularized “athleisure wear” by turning pricey women’s yoga wear into mainstream fashion, is seeking to shore up profits as it faces growing competition from brands including Under Armour Inc (UAA.N), Nike and Gap Inc (GPS.N).

It has restructured its money-losing Ivivva brand, turning it into a primarily e-commerce operation, boosted investment in its online and international businesses and expanded its men’s offerings.

Total comparable store sales rose 7 percent, while rising sales in the e-commerce business after a relaunch of its websites in the third quarter contributed to revenue growth in the direct-to-consumer business, the company said in a statement.

It reported adjusted earnings of $1.33 per share in the three months ended Jan. 28, up from $1 a year earlier as revenue increased 18 percent to $928.8 million. Including the effect of restructuring charges related to Ivivva and a U.S. tax overhaul, net income fell to $119.8 million, or $88 cents per share, from $136.1 million, or 99 cents, a year earlier.

Analysts had expected adjusted net income of $1.27 per share, and revenue of $912.4 million, according to Thomson Reuters I/B/E/S.

For the fiscal year, the company reported an increase in adjusted earnings to $2.59 per share, versus $2.14 a year earlier. It forecast earnings per share of between $3 and $3.08 for the full year on revenue of $2.985 billion to $3.022 billion.

“We are seeing strong momentum across our business as we now move into 2018, which is further positioning us to achieve our 2020 revenue goal of $4 billion,” Chief Operating Officer Stuart Haselden said in the statement.

Reporting by Nichola Saminather; Editing by Peter Henderson, Richard Chang and Sandra Maler

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