Lululemon quarterly sales top expectations, shares jump

Wed Dec 7, 2016 9:16pm EST
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By Solarina Ho

TORONTO (Reuters) - Canadian yoga and leisure apparel retailer Lululemon Athletica Inc on Wednesday reported quarterly profit that beat analysts' forecasts, helped by higher-than-expected gross margins and sales.

Supply chain improvements, a problem area that has plagued the company in recent years, and lower product costs underpinned the company's improved margins and were also driving improvements in the fourth quarter, executives said in an analysts' conference call.

"We continue to be on track with our five-year plan of doubling our revenue and more than doubling our earnings," said chief executive Laurent Potdevin.

"The gross margin expansion is a key element in the earnings recovery that we see today and expect going forward."

Gross margin, or revenue less the cost of goods sold, rose to 51.1 percent, from 46.9 percent a year ago.

Third-quarter sales online and at stores open at least a year rose 7 percent, excluding exchange rate fluctuations. That beat the 5.4 percent increase expected by analysts, according to Consensus Metrix.

The fourth quarter began slowly in November, before picking up around Black Friday and Cyber Monday weekend, executives said, noting strong double-digit same-store sales during the U.S. Thanksgiving holiday period.

For the fourth quarter, the company said it was expecting revenue of $765 million to $785 million and earnings of 96 cents to $1.01 per share.   Continued...

A Lululemon store logo is pictured on a shop in Santa Monica, California, United States, April 12, 2016. REUTERS/Lucy Nicholson