December 11, 2014 / 11:49 AM / 3 years ago

Lululemon profit beats on lower costs, but revenue outlook cut

(Reuters) - Yogawear chain Lululemon Athletica Inc (LULU.O) reported a stronger-than-expected quarterly profit on Thursday, driven in part by lower costs, but U.S. port disruptions and delayed store openings took a toll on its revenue outlook.

Yogawear retailer Lululemon Athletica Inc's logo is pictured at its store in downtown Vancouver June 11, 2014. REUTERS/Ben Nelms

Shares of the Canadian retailer jumped 10 percent to $51.32 after it reported the results, with investors taking note of an increase in comparable store sales.

Total same-store sales, which include comparable-store and online sales, rose 3 percent year-over-year on a constant-dollar basis in the third quarter. This key measurement was flat in the second quarter. Online sales jumped 27 percent.

The once high-flying stock is still down some 25 percent since March 2013, continuing to feel effects of an embarrassing recall of its signature yoga pants, which were deemed too sheer.

“The improving comparable sales are encouraging. The story for the back half of 2014 is about improving product flow and we’re beginning to see it,” said Mark Altschwager, an analyst at Baird Equity Research.

“That said, margins remain under intense pressure and new supply chain delays may curb some of the recent momentum.”

The Vancouver-based company said fourth quarter revenue will take a roughly $15 million hit from U.S. West Coast port delays, a lower Canadian dollar and delayed store openings. It now expects revenue of $570 million to $585 million for the quarter.

Disruptions at U.S. ports, caused by a shortage of equipment and protracted labor negotiations, have resulted in seven- to 10-day delays and have also hurt the company’s Canadian business because shipments to Vancouver often make U.S. stops first, executives said.

Lululemon is working to reroute most shipments to North America directly to Vancouver and sending U.S. cargo by rail, which it expects will trim delays to one to three days.

The company, which faces increased competition in a market it once dominated, raised its adjusted profit forecast for the year that ends in early February to $1.74-$1.78 per share from $1.72-$1.77. Analysts, on average, had expected earnings of $1.77 per share.

Net income fell to $60.5 million, or 42 cents per share, in the quarter ended Nov. 2 from $66.1 million, or 45 cents, a year earlier. Analysts had expected earnings of 38 cents per share.

Revenue rose 10 percent to $419.4 million, but fell short of expectations of $424.8 million.

Lululemon cut its full-year revenue forecast to $1.77 billion-$1.78 billion from $1.78 billion-$1.80 billion. Analysts had expected $1.79 billion.

With additiional reporting by Ashutosh Pandey in Bengaluru; Editing by Sriraj Kalluvila, Jeffrey Hodgson and Peter Galloway

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