Lululemon rises on earnings, vows to defend patents

Fri Sep 7, 2012 11:46am EDT
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By Allison Martell

TORONTO (Reuters) - Canadian yogawear retailer Lululemon Athletica Inc LLL.TO reported higher quarterly profit and boosted its outlook on Friday, while vowing to push back against cheaper knock-offs that could threaten its business.

The typically volatile stock rose nearly 8 percent on Friday morning after the company posted the results, which were in line with analysts' expectations excluding the impact of a lower-than-expected tax rate.

Founded in 1998, Lululemon made yoga apparel fashionable with its signature $98 pants, but it now faces rising competition from heavyweight brands at lower prices.

"While others may try to mimic parts of our business, it is impossible to copy a personality," said Chief Executive Christine Day on a conference call with analysts and investors.

Day said the company has an intellectual property portfolio to protect its "classic styles," and acknowledged a patent suit the company filed in August against PVH Corp's (PVH.N: Quote) Calvin Klein and manufacturer G-III Apparel Group Ltd GIII.O.

"When we see attempts to mirror our product we will take the necessary steps to protect our assets," she said.

Lululemon's colorful, form-hugging clothes are ubiquitous in Canada, especially among affluent young women, and the brand is becoming increasingly popular in the United States.

But it trades at a premium, 46 times earnings based on Thursday's close, while Nike trades at 21 times earnings, and recently any sign that its growth might slow has spooked markets.   Continued...