Lululemon reassures investors that its problems are temporary

Thu Mar 26, 2015 1:24pm EDT
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By Solarina Ho

(Reuters) - Canadian yogawear retailer Lululemon Athletica Inc (LULU.O: Quote) on Thursday reported stronger-than-expected quarterly results and gave a weak outlook that it said was largely due to temporary problems.

The company's shares were up more than 7 percent after investors were reassured that the outlook did not reflect underlying obstacles to growth. Lululemon forecast earnings and revenue below Wall Street estimates, citing West Coast port delays, weather and currency factors.

"There may be a bit of relief that there's some explanation to some of that weakness," said ITG Investment Research analyst Matthew Jacob. "Investors that are bullish on the name continue to buy into notion that this is a company that continues to progress toward turning things around."

Still, Jacob expressed caution, saying the outlook appeared weaker even accounting for external factors.

"I think they're getting a little bit of a pass on (the forecast) from investors," he said.

Lululemon's issues began two years ago as major competitors were moving into the market it once dominated. A high-profile recall of its signature yoga pants for being too see-through led to top executive departures.

The company has since worked to improve quality, expand its product line and solve supply-chain problems, while laying the groundwork for faster international growth.

On Thursday, Lululemon said underlying demand was consistent with holiday-period trends, and it reiterated plans to increase spending on new store openings and other investments.   Continued...

Pedestrians walk past a store of yogawear retailer Lululemon Athletica in downtown Vancouver in this June 11, 2014 file photo. REUTERS/Ben Nelms/ Files