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Lululemon lifts annual forecast, moves beyond ‘sheer-gate’ incident

Yoga-outfit maker Lululemon Athletica reported stronger-than-expected earnings in the second quarter.
Yoga-outfit maker Lululemon Athletica reported stronger-than-expected earnings in the second quarter.
(Benjamin Norman / Bloomberg)

Shares of Lululemon Athletica Inc. soared Thursday after the company increased its annual forecast and reported a stronger-than-expected second quarter.

For the three months that ended Aug. 3, the yoga-wear maker said net income was $48.7 million, or 33 cents a share, compared with $56.5 million, or 39 cents, in the year-earlier period. Revenue jumped 13% to $390.7 million.

Lululemon raised its annual profit forecast by a penny to a range of $1.72 to $1.77 a share.

Wall Street reacted to the news by boosting shares of the yoga-clothing maker as high as $45.49 before closing at $43.73, up $5.35, or nearly 14%.

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The Vancouver, Canada, company’s latest performance indicates it is starting to recover after it was forced to recall thousands of black yoga pants last year because of a manufacturing defect that made them see-through.

The “sheer-gate” incident shook up the retailer’s executive ranks.

Chief Executive Christine Day was replaced by Laurent Potdevin, formerly president of Toms Shoes. Founder Chip Wilson stepped down as chairman in December, and then sold 50% of his stake to private-equity firm Advent International for $845 million.

Potdevin said the company is “on track” and “starting to see results” in implementing its strategy. He has been steering the retailer toward offering apparel beyond yoga outfits for women. Lululemon announced plans last year to open men’s stores by 2016.

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“While there is still much to be done, we are making meaningful progress on building a scalable foundation for our next phase of global growth,” he said in a statement.

Lululemon is a huge player in a growing market for stylish athletic clothing. Sales of yoga and active-wear jumped by 7% to $33.6 billion last year, according to NPD Group, while denim sales dropped 6% to $16 billion.

Follow Shan Li on Twitter @ShanLi


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