Lululemon raises fourth-quarter forecast, shares up

(Reuters) - Clothing chain Lululemon Athletica Inc LULU.O raised its profit and revenue forecasts for the last quarter of 2018 on Monday, building on signs that strong growth online and in China is improving overall results.

FILE PHOTO: People walk past a store by yogawear retailer Lululemon Athletica in New York City, U.S., March 30, 2017. REUTERS/Brendan McDermid

The forecast comes about a month after the company reported a surge in online traffic in the third quarter and registered a 76 percent jump in its e-commerce business in China.

Chief Executive Officer Calvin McDonald, who has upped investment in China and in December identified Asia as a key growth driver, said the outlook revisions reflected “success around the globe”.

The company’s shares, up 12 percent in the past six months, gained 7 percent to $141.38 in morning trade.

The key holiday shopping season during November and December is important for retailers as they record a significant portion of their annual sales, both in-store and online, during the period.

Susquehanna analyst Sam Poser, in a note on Jan. 8, said the trade war between the United States and China will not have a major impact on Lululemon, U.S.-based apparel maker V.F. Corp VFC.N and Canadian luxury apparel company Canada Goose Holdings Ltd GOOS.N.

“Each company is underpenetrated in China and has a great deal of white space there. We are confident that innovation and brand strength will provide a long runway for growth in China and other geographies,” Poser said.

Lululemon, which popularized “athleisure wear” by turning pricey women’s yoga wear into mainstream fashion, now expects revenue in the range of $1.14 billion to $1.15 billion in the fourth quarter compared with its previous forecast of $1.12 billion to $1.13 billion.

The chain, which has seen strong same store growth in the past few quarters, raised its earnings forecast to between $1.72 and $1.74 per share, from a previous profit estimate of $1.64 to $1.67 per share.

Analysts on average had estimated the company would report a profit of $1.69 per share for the quarter, according to IBES data from Refinitiv.

The Vancouver-based company has been investing heavily in expanding its online presence and offering more menswear to lure customers in a highly competitive retail sector, dominated by the likes of Under Armour Inc UAA.N, Nike NKE.N and Gap Inc GPS.N..

Reporting by Arundhati Sarkar in Bengaluru; Editing by Anil D’Silva and James Emmanuel