Lululemon lifts annual forecasts on resilient yogawear demand

(Reuters) -Lululemon Athletica Inc raised its annual sales and profit forecasts on Thursday, betting on strong demand for its activewear from affluent U.S. shoppers and a recovery in China, sending its shares up 11% in extended trading.

The pandemic-era appetite for comfortable clothing and activewear has turned into a habit for most Americans, helping companies such as Lululemon and Nordstrom Inc (NYSE:) avoid an inflation-driven slump in wider discretionary spending.

Activewear was Nordstrom’s best-performing category in the quarter, it said on Wednesday.

Lululemon is also banking on new launches and more full-price selling to drive revenues and offset any impact from promotions taken to clear excess product stocks. Its inventories at the end of the first quarter were up 24%, lower than the 30% to 35% increase that the company had estimated in March.

The easing of China’s strict COVID-19 curbs have also brought back shoppers to its stores in the region – which accounted for about 8% of the company’s total sales last year – driving a 60% surge in international revenues in the quarter.

Lululemon benefited from an easing in air freight costs as well, which boosted its quarterly gross margin by 360 basis points to 57.5%.

Vancouver, Canada-based Lululemon now expects full-year 2023 revenue between $9.44 billion and $9.51 billion, compared with its prior estimate of $9.30 billion to $9.41 billion. Analysts on average had estimated $9.37 billion, according to Refinitiv IBES data.

The company projected full-year 2023 profit between $11.74 and $11.94, compared with its prior estimate of $11.50 to $11.72 per share.

Net revenue rose to $2.00 billion in the first quarter from $1.61 billion a year earlier, with a 17% jump in North America alone. That compared to Wall Street estimates of $1.93 billion.

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