Lululemon outlook lift thrills Wall St as yogawear stays in vogue

Lululemon Athletica Inc (LULU.O) raised its annual sales and profit forecasts on Thursday as wealthy Americans snap up its pricey activewear even though inflation hounds wider retail spending, sending the company’s shares up 13 per cent after hours.

A strong rebound in China, easing air freight costs and tighter inventory control also helped first-quarter results surpass estimates at the Vancouver, Canada-based company.

The pandemic-era appetite for comfortable clothing and activewear has turned into a habit for most Americans. That, along with a higher-income customer base, has been a boon for companies such as Lululemon and Nordstrom Inc JWN.N.

“We’ve seen no change in our (customer) behaviour in terms of frequency of purchase or engagement,” Lululemon CEO Calvin McDonald said on a post-earnings call. Transactions increased from both existing and new customers, while traffic was also robust.

Lululemon’s crowd-favorite Dance Studio pants and new silhouettes such as flared and wide-leg leggings were also in vogue, along with accessories such as backpacks and duffle bags, McDonald added.

“I think they surprised everybody – there are not many companies in retail that have had this solid track record of very strong growth in comps every quarter,” said M Science analyst Matthew Jacob.

Lululemon’s inventories at quarter-end were up 24 per cent, a smaller increase than the company had estimated in March. It expects growth of about 20 per cent at the end of the current quarter.

The easing of China’s strict COVID-19 curbs bolstered revenues from the region by 79 per cent, while North America sales jumped 17 per cent.

That drove net revenue up 24 per cent to $2 billion in the quarter, beating estimates of $1.93 billion, according to Refinitiv IBES.

Lululemon now expects full-year 2023 revenue between $9.44 billion and $9.51 billion, compared with $9.30 billion to $9.41 billion projected earlier.

It forecast annual profit between $11.74 and $11.94 per share, up from $11.50 to $11.72 earlier.