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Lululemon rises as yoga-wear maker’s sales outperform once again

Lululemon rises as yoga-wear maker’s sales outperform once again
Business
Lululemon Athletica showed continued strength in the latest quarter while boosting its full-year profit forecast — though not by as much as investors had expected.

Comparable sales — an important measure for retailers — rose 16 per cent on a constant-currency basis, above the 11.4 per cent estimate from Consensus Metrix. It now sees profit at $4.51 to $4.58 (U.S.) a share this year. While that’s above 3 cents higher than the previous guidance, it’s still below expectations.

Key insights

Investors have become accustomed to strong growth at Lululemon, and the latest quarter shows that there’s still momentum.

While a growing number of apparel retailers are struggling, Lululemon’s report reinforces that its products are appealing to shoppers.

E-commerce is a key area for the Vancouver-based company, and the data strengthened in the first quarter. Online sales climbed by 35 per cent on a constant-currency basis in the period.

Lululemon is betting it can grow by moving beyond upscale athletic apparel and offering a broader range of goods and services. A new Chicago location next month will feature meditation space, health foods and juices and areas for community gatherings. It’s also selling grooming products such as deodorant and dry shampoo in 50 stores and online starting next week.

While the company says it imports only a small percentage of its merchandise to the U.S. from China, it’s preparing for port congestion as companies rush to import goods ahead of the looming tariffs. So Lululemon will use more air freight to avoid ports and make sure merchandise arrives on time, Chief Financial Officer PJ Guido said on a conference call. This will cause gross margin to narrow and shave 4 to 5 cents off of earnings per share this year, he said.

Market reaction

Lululemon shares rose as much as 5 per cent in late trading. The stock, which has 21 buy recommendations from analysts, has advanced 41 per cent this year through Wednesday’s close.
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