Lululemon raises profit forecast, shares jump

Tue Jan 10, 2012 12:00pm EST
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By Allison Martell

TORONTO (Reuters) - Lululemon Athletica expects profit and sales in the current quarter to top earlier forecasts after holiday shoppers flocked to its shops to snap up the trendy yoga wear that have made the company a runaway retail success story.

Shares of the Vancouver-based retailer jumped 15 percent on Tuesday after the fresh forecast, which validated the optimism of observers who had thought the company's earlier sales forecast was too conservative.

Sales at established stores, a key measure for retailers, are now expected to rise more than 20 percent in its fiscal fourth quarter ending January 29. That's further evidence the company has addressed the problem of inadequate inventories at its 165 stores in North America and Australia.

Lululemon has twice forecast that same-store sales growth would slow to the low to mid-teens in percentage terms, raising fears that the company's meteoritic rise could start to peter out.

"Lululemon did not get sucked into the vortex that was the excessive discounting within the specialty apparel sector," independent retail analyst Brian Sozzi said.

"They had a lot of people pouring through their doors, like Macy's did ... but I think they drove a higher quality customer to the store, and were able to maintain that price point."

The company's clothing and gear, which is increasingly targeted at runners as well as yogis, is ubiquitous in Canada and, increasingly, in the United States. It inspires fierce brand loyalty, with bloggers breathlessly documenting every product launch.

It has also been a market darling, with the shares rising 39 percent last year despite a second-half slump.   Continued...