Lululemon raises annual forecasts for second time on buoyant demand

(Reuters) -Lululemon Athletica lifted its annual profit and revenue forecasts for a second time after beating quarterly estimates on Thursday, betting on steady demand for its activewear from affluent shoppers in North America and China.

Lululemon (NASDAQ:) – which in the last quarter said that there was no change in customer behavior – has seen people stick to their pandemic habits of shopping for comfortable clothing such as Dance Studio pants, running shorts as well as accessories like backpacks and duffle.

Like industry peer Hibbett, Lululemon has also been launching products such as “road-to-trail” running shoes and introducing new colors in its sports apparel in a bid to attract more customers to shop at its stores.

Lululemon’s revenue in North America surged 11% in the second quarter, slowing from the 17% increase it saw in the first quarter.

While the recovery in China has been slower than anticipated for many consumer companies, Lululemon has seen demand remain steady following the easing of pandemic restrictions, with a 61% increase in revenue from the country during the quarter.

The annual forecast lift comes at a time when several industry peers such as Nike (NYSE:) are taking a cautious stance towards second half of the year due to a weakening consumer spending environment.

Lululemon said inventories increased 14% in the quarter, below about 20% growth forecast in June, while gross margins rose 230 basis points to 58.8%.

The company now expects full-year 2023 revenue between $9.51 billion and $9.57 billion, compared with its prior estimate of $9.44 billion to $9.51 billion.

Lululemon now also expects annual profit between $12.02 and $12.17 per share. The company had earlier forecast earnings of $11.74 to $11.94 per share.

The premium apparel retailer’s revenue rose to $2.21 billion in the second quarter, while analysts on average had expected $2.17 billion, according to Refinitiv IBES data.