Lululemon shares jump on boosts to stock buyback, profit forecast

By Bill Peters

CEO cites 'strong momentum in our international markets'

Shares of Lululemon Athletica jumped after hours Wednesday, after the yoga-wear maker and athleisure giant announced a $1 billion increase to its stock-buyback program and raised its full-year profit outlook.

Lululemon (LULU) said it expects earnings per share of $14.27 to $14.47 for the year, up from a prior outlook of $14 to $14.20. The company stuck with its sales forecast of $10.7 billion to $10.8 billion.

For the second quarter, however, the forecast was a bit light. Lululemon said it expects sales of $2.4 billion to $2.42 billion in the period, with a per-share profit of $2.92 to $2.97. Analysts polled by FactSet expected $2.45 billion in revenue, with earnings of $3.03 a share.

The company's shares rallied nearly 10% after hours. However, the stock is down 39% so far this year amid concerns over slowing demand, and Wall Street's expectations were low heading into Lululemon's first-quarter results.

Analysts remain concerned about increased competition from the likes of Alo Yoga and Vuori, as well as a slowdown in its business in North America. Others have said that a shift in taste toward wider-leg pants threatens athleisure's longstanding popularity.

During the first quarter, Lululemon reported net income of $321.4 million, or $2.54 a share, compared with $290.4 million, or $2.28 a share, in the same quarter last year. Revenue climbed 10% to $2.2 billion, while same-store sales rose 6%.

Analysts polled by FactSet expected Lululemon to earn $2.40 a share, on sales of $2.19 billion and same-store sales gains of 6.8%.

"In the first quarter, we saw strong momentum in our international markets, demonstrating how our brand continues to resonate around the world," Chief Executive Calvin McDonald said in a statement. "Guests responded well to our product innovations across categories, and we are pleased by the progress we are making to optimize our U.S. product assortment."

When Lululemon last reported quarterly results in March, executives offered up a sales outlook that fell shy of Wall Street's expectations. Executives said the retail-industry backdrop remained "dynamic," as a two-year bout with aggressive inflation has forced more shoppers to prioritize essential purchases. The company said it would focus on pushing "innovative new products and brand activations."

Former Lululemon Chief Product Officer Sun Choe resigned last month to become global brand president of Vans, the sneaker brand owned by VF Corp. (VFC) BofA analysts said Choe was an "integral member" of Lululemon's leadership team.

However, they added that despite its other difficulties, international growth, particularly in China, remained a bright spot for the company.

-Bill Peters

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06-05-24 2015ET

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