(Bloomberg) -- Lululemon Athletica Inc. shares jumped on Thursday after international sales growth and new women’s merchandise helped propel a higher full-year profit outlook.
The yogawear brand will be unveiling new products through 2024, including leggings that use hydrogen yarn in July, and it has invested in store expansion, supply-chain improvements and international facilities. The company hopes to attract more male shoppers with offerings for training and golf.
KeyBanc Capital Markets analyst Ashley Owens wrote that Lululemon’s results were solid, with the international business continuing to be a “bright spot.” Lululemon now sees its earnings per share up 27 cents from the previous view and above the average analyst estimate.
Chief Executive Officer Calvin McDonald told analysts that Lululemon had “missed opportunities” in its women’s business last quarter and is honing its product assortment to drive demand. Biker shorts and loose-fitting pants were hot products.
US consumers are “still spending, but I think they’re being selective of where they spend and what they choose to buy,” McDonald said in an interview. He attributed the company’s higher earnings outlook to better sales of more profitable items.
The stock rose 4.8% at 9:34 a.m. in Thursday trading in New York and it had declined about 40% through Wednesday’s close.
First-quarter comparable sales were flat in the Americas, while they rose 25% in the international segment. Overseas markets are becoming a bigger part of the company’s business — while it currently accounts for about 21% of revenue, executives see it reaching 50% in the long term.
“We continue to fret over potential competitive incursions impacting consumer trends at Lululemon, domestically,” wrote Oppenheimer analysts led by Brian Nagel. The concerns are somewhat offset, however, by the new products being introduced.
Lululemon has posted strong sales in recent years despite struggles at many US apparel companies as shoppers shifted to more casual outfits during the pandemic, but concerns over slowing growth materialized last quarter. McDonald helped alleviate some concerns by telling analysts that US store traffic was positive in the first quarter.
Profit in the fiscal first quarter, which ended April 28, was higher than expected, while Lululemon also boosted its share buyback program by $1 billion. Sales were largely in line with expectations, and Lululemon maintained its earlier full-year sales guidance at as much as $10.8 billion.
Investor worries also rose in May, when Lululemon’s product chief Sun Choe departed the company for the top role at Vans, VF Corp.’s ailing skateboarding footwear and apparel brand. She won’t be replaced and her responsibilities have been reassigned to the company’s creative director. McDonald said there’s no additional realignment planned among senior management.
“This was our planned succession,” he said. “This is a permanent structure, not interim.”
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