Shares of Lululemon Athletica Inc. rose 9.1 percent following a bump up in its fourth-quarter guidance and despite a drop in third-quarter profits.

This story first appeared in the December 12, 2014 issue of WWD. Subscribe Today.

While the company wasn’t too enthusiastic about the fourth-quarter outlook, due in part to West Coast port issues, Lululemon raised earnings guidance for the year from $1.74 to $1.78 a share, from prior estimates of $1.72 to $1.77.

For the fourth quarter, the Vancouver, Canada-based firm forecasted diluted earnings per share in the range of 65 cents to 69 cents on projected net revenues of between $570 million to $585 million.

Laurent Potdevin, chief executive officer, told Wall Street analysts in a conference call, that the company is “actively implementing a number of strategies to mitigate delivery issues” due to the West Coast port situation.

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The company has inventory that’s still on the water, and has been experiencing delays of seven to 10 days. The delays are expected to impact “fourth quarter and year-end revenue guidance by approximately $10 million,” he said. The company also noted that the port matter is impacting its Canadian business as well, because ships from Asia might stop in L.A. and Seattle before heading to Vancouver.

Net income for the three months ended Nov. 2 fell 8.5 percent to $60.5 million, or 42 cents a diluted share, from $66.1 million, or 45 cents, a year ago. Net sales rose 10.4 percent to $419.4 million from $379.9 million. Total comparable-store sales, including stores and online, were up 3 percent on a constant dollar basis. While comps for stores were down 3 percent, that was offset by direct-to-consumer revenues, which rose 27 percent on a constant dollar basis. The company said online sales, at $77.2 million, were 18.4 percent of total company revenues compared with 16.3 percent a year ago.

Wall Street was expecting earnings of 38 cents on revenues of $424.8 million.

Jefferies’ Randal J. Konik has a “Hold” on shares of Lululemon. “Improved demand trends are a step in the right direction, but ongoing supply-chain issues continue to give us pause. Further, internal infrastructure challenges are being compounded by external pressure from an increasingly crowded ‘ath-leisure’ market,” he said.

Shares of Lululemon closed at $50.96 in Nasdaq trading.

Potdevin said, “As expected, we delivered a better product assortment, which was a key driver of improved performance this fall, compounded with more cohesive brand and product communication in-store, online, and through our p.r. strategy. We were pleased to see sequential improvements in each month as the quarter progressed, driven by our product flows and new allocation.”

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