Lululemon Athleta Inc. more than tripled first-quarter profits as demand for its brightly colored yoga-inspired apparel lifted sales nearly 70 percent.
The Vancouver-based firm also raised its full-year sales and earnings forecast, helping to propel the company’s shares up $1.73, or 4.4 percent, to $40.83 Thursday.
In the three months ended May 2, Lululemon rang up net income of $19.6 million, or 27 cents a diluted share, 6 cents better than the 21 cents expected, on average, by analysts polled by Yahoo Finance. In the year-ago quarter, profits were $6.5 million, or 9 cents a share.
Sales jumped 69.3 percent to $138.3 million, from $81.7 million, and quarterly comparable-store sales increased 35 percent on a constant-dollar basis. Sales exceeded the consensus estimate by $10.1 million.
Gross margin for the quarter increased to 53.8 percent of revenues versus 42.9 percent a year earlier. Fewer markdowns, lower product sourcing costs and a favorable currency exchange rate contributed to this improvement, according to the company.
“This was our company’s best-ever first quarter as we were able to generate very strong same-store sales growth in both the U.S. and Canada,” said chief executive officer Christine Day, who added that results were driven by robust sales of yoga and running apparel, as well as strong growth in equipment and accessories.
Previously, insufficient inventory had held back Lululemon’s revenues, but Day assured analysts and investors on the company conference call that “inventory levels now match sales trends,” allowing for “opportunities to continue to refine channel allocation to e-commerce and to chase smaller sizes to meet market demand.”
According to Stifel Nicolaus specialty retail analyst Richard Jaffe, the company is “firing on all cylinders, but the stock is fully valued.”
Jaffe, who rates the stock “hold,” said Lululemon has growth opportunities in such areas as e-commerce, which made up 6.6 percent of total sales in the first quarter.
“We believe e-commerce has the long-term potential to be a $100 million to $150 million business. Lululemon’s e-commerce customer database should provide important demographic information and serve as an integral part of the company’s expansion strategy, helping to identify key markets with the potential to support a new store,” he said.
For the second quarter, Lululemon anticipates earnings per share of between 21 cents and 23 cents on sales in the range of $140 million to $145 million. For the year, the company forecast EPS of between $1.05 and $1.10 and revenues of $620 million to $635 million, up from prior guidance of EPS of between $1 and $1.05 and sales of between $570 million and $585 million.
Analysts were looking for second-quarter EPS of 21 cents and sales of $132.6 million. Full-year earnings are projected to total $1.10 on revenue of $591.7 million.