Lululemon Athletica inc. stock jumped 15 per cent Tuesday after the fashion company announced this quarter's sales are turning out to be even stronger than expected.
The yoga-inspired retailer now expects between $358-million (U.S.) and $363-million of revenue for the quarter ending Jan. 29, about $30-million higher than its previous guidance and analyst estimates.
It also expects diluted earnings will be about seven cents per share higher than previously estimated, in a range of 47 cents to 49 cents per share.
The increase will raise the projected profit by about $7-million to between $47.5-million and $49.6-million, based on about 101 million shares outstanding.
Lululemon shares gained $8.34 (Canadian) to trade at $63.03 on the Toronto Stock Exchange shortly after the market opened Tuesday.
The Vancouver-based company known for its trendy yoga fashions and accessories has been one of the most successful retailers in the market. Its quarterly results consistently beat its own guidance as well as analysts' estimates as its brand continues to grow in the U.S. and globally.
Lululemon shares have been on a tear, soaring nearly 90 per cent in the past year.
Its third-quarter earnings issued last month showed significant growth from last year, but revenue fell short of analyst estimates.
Lululemon's third-quarter financial report in early December showed its profit was up 51 per cent from a year earlier to $38.8-million or 27 cents per share and its revenue was up 31 per cent to $230.2-million.
The retailer noted that revenues were not as high that quarter as they could have been because it sold out of some items, leaving unmet demand.
The company operates on a scarcity model that leaves its customers hungry for its fashionable and form-fitting athletic wear and accessories that often disappear from shelves.
Lululemon has said several times that it plans to fix its inventory troubles as it struggles to keep up with demand. But that short supply also means it can avoid end-of-season markdowns.
Its previous guidance for the fiscal fourth quarter, which includes the important holiday buying season, was for a range of $327-million to $332-million and diluted earnings per share in a range of 40 cents to 42 cents per share.
Lululemon chief executive Christine Day, who has said in previous reports that the company could have sold more of some items if they were in stock, said Tuesday the company's efforts to adjust have paid off.
"Our work throughout the year building our inventory position is driving our success in the fourth quarter," Ms. Day said in a statement.
Lululemon opened its first store in 1998 in Vancouver and has expanded to 151 stores in the past decade.
Last week, its influential founder Chip Wilson announced plans to resign as chief innovation and branding officer effective Jan. 29, which marks the end of the current quarter and financial year.
Mr. Wilson will stay on as chairman of the company's board of directors.
Mr. Wilson, 55, said he feels comfortable leaving the company in Ms. Day's hands. She was recently named Report on Business magazine's CEO of the year.
— with a contribution from David Paddon in Toronto