Lululemon profit rises, outlook disappoints

Thu Mar 22, 2012 11:13am EDT
 
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By Allison Martell

(Reuters) - Lululemon Athletica Inc LLL.TO on Thursday offered a disappointing full-year profit outlook for its chain of trendy yogawear shops, offsetting a surge in quarterly earnings and sales, and leaving its shares little changed.

The Vancouver-based retailer's profit in the three months ended January 29 climbed 34 percent, slightly more than expected, while sales in established stores rose 26 percent.

The results were slightly ahead of a revised forecast the company had given in January after a stronger-than-expected holiday shopping season.

Even so gross profit margin tightened to 56.3 from 58.5 percent a year earlier, due to higher raw material costs and discounting to reduce stocks of unsold merchandise. Inventory at the end of the quarter stood at $104.1 million, up from $57.5 million a year earlier.

"Lululemon needed to just blow the earnings results out of the way, which was going to be hard" given January's forecast, said Brian Sozzi, chief equities analyst at NBG Productions, explaining the market's lukewarm response.

SUCCESS STORY

Lululemon, one of Canada's most successful retailing exports, has expanded rapidly in the United States. Its clothing and gear, ubiquitous in Canada and increasingly popular south of the border, inspires fierce brand loyalty, with bloggers breathlessly documenting every product launch.

The typically volatile stock was up 0.5 percent at C$73.91 in early trading on the Toronto Stock Exchange on Thursday.   Continued...