Lululemon's Profits Climb As Sales Growth Slows

Lululemon's Profits Climb As
Sales Growth Slows

Shares of Lululemon Athletica Inc., the Vancouver-based yoga-wear retailer, rose more than 5 percent even after it expected sales growth at established stores to slow sharply in the current quarter. Third-quarter results, however, came in stronger than expected. The growth was helped by strength in its online business and store openings.

The shares rose 7.3 percent to $73.57 at the close in New York, the biggest one-day gain since Sept. 7. The Vancouver- based company has gained 58 percent this year.

Lululemon has been pursuing overseas expansion, laying the groundwork for stores in Hong Kong, London and Germany. The company has more than doubled revenue in its e- commerce business in the past three quarters to $119 million from $56 million, while sales at company-owned locations have jumped 36 percent to $712.1 million, Lululemon said in its quarterly filing today.

Lululemon “remains one of the key brands that is building awareness, driving share, and selling product at full price in a sea of price competition,” Adrienne Tennant, an analyst at Janney Montgomery Scott LLC with a buy rating on the stock, wrote in a note today. The company “remains an attractive longer term growth story, and we believe earnings growth is still above 30 percent annually for the next several years,” she wrote.

Profit this fiscal year will be as much as $1.83 a share, which is 2 cents higher than previously forcasted, Lululemon said in a statement today. Analysts’ projected $1.81, the average of estimates compiled by Bloomberg.

In the past year, Lululemon has opened 21 stores in the U.S., eight in Australia and two in New Zealand, as well as five Canadian locations for ivivva athletica, which makes dance-inspired apparel for young people.

Day, who ran Starbucks Corp.’s Asia-Pacific unit before joining Lululemon, said the retailer is also looking to boost its men’s business, which is typically about 12 percent of sales.

The retailer, which sells yoga pants for $98 to a loyal customer base, has faced growing competition as stores like Athleta and VF Corp.’s Lucy find their footing.