Lululemon stock jumps on robust demand for pricey yoga pants

Lululemon Athletica Inc. raised its full-year outlook, the latest sign that consumer demand among high-income shoppers remains strong even as inflation hurts purchasing power in other demographics. The shares rose in late trading. 

The maker of yoga pants and high-priced exercise attire now sees its full-year sales in a range of US$7.87 billion to US$7.94 billion, up from the previous range that had US$7.71 billion as its upper limit. Its outlook for third-quarter sales also surpassed analysts’ average estimate.

Key Insights

• Chief Executive Officer Calvin McDonald said that customers responded well to new products and community events that are meant to drive store traffic. “The momentum in our business continued in the second quarter,” he said in a statement. 
• The company seeks to double its sales by 2026 by selling more goods to men and expanding Lululemon’s footprint abroad. That goal now looks more attainable, with Chief Financial Officer Meghan Frank saying traffic at stores and online “remains robust.”
• Executives opened their first stores in Spain in July as they ease into new markets -- a crucial part of the company’s growth plan. Lululemon now operates stores in eight European countries.
• The quarterly results outperformed expectations across a series of measures, from profit per share to comparable sales. Inventory also surged 15 per cent from a quarter earlier -- a trend that has caused trouble at other retailers in recent months. But Lululemon said its current stockpile has the company “well positioned to support its expected revenue growth in the third quarter.”

Market Reaction

• The shares rose 8.4 per cent at 4:33 p.m. in after-market trading on Thursday in New York. The Vancouver-based company’s stock has declined 25 per cent this year through Thursday’s close, in line with the decline of the Nasdaq 100 Index.
•  Lululemon Athletica Inc. raised its full-year outlook, the latest sign that consumer demand among high-income shoppers remains strong even as inflation hurts purchasing power in other demographics. The shares rose in late trading. 
• The maker of yoga pants and high-priced exercise attire now sees its full-year sales in a range of US$7.87 billion to US$7.94 billion, up from the previous range that had US$7.71 billion as its upper limit. Its outlook for third-quarter sales also surpassed analysts’ average estimate.