March 26, 2015 / 10:49 AM / 4 years ago

Lululemon reassures investors that its problems are temporary

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

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

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.

New Chief Financial Officer Stuart Haselden said port delays hurt sales of its spring line and some of its late-winter goods.

The company, which reports revenue in U.S. dollars, also said it was hurt by the weaker Australian and Canadian dollars, which reduce the value of sales there. They also compress gross margins because Lululemon buys its product in U.S. dollars.

The Vancouver-based company forecast earnings of 31 cents to 33 cents a share for the current quarter. Analysts on average were expecting 39 cents, according to Thomson Reuters I/B/E/S.

It forecast of $413 million to $418 million for the quarter, below estimates of $442 million.

Lululemon said it expected fiscal-year earnings of $1.85 to $1.90 a share on revenue of $1.97 billion to $2.02 billion. Analysts had expected $2.06 a share on sales of $2.05 billion.

Earnings of 78 cents a share in the fourth quarter ended on Feb. 1 beat analysts’ estimates of 73 cents, while revenue of $602.5 million edged past forecasts of $602.4 million.

With additional reporting by Euan Rocha and Julie Gordon in Toronto and Sayantani Ghosh in Bangalore; Editing by Maju Samuel, W Simon and Lisa Von Ahn

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