Shares of Lululemon are rallying near 7% in early morning trading Tuesday, after the company posted first quarter earnings that beat estimates and upbeat guidance. The earnings beat comes as analysts and investors of Lululemon wonder whether the effects of the “pants-gate” scandal are officially behind the company. After the company began recalling its iconic yoga pants in early 2013 for being see-through, the company did see some backlash from consumers. However, with positive results coming in for the athletic apparel store better than expected, Lululemon could be finally turning a corner.
Revenue rose 10% y/y and online sales jumped 31% during the same period
Lululemon reported first quarter earnings per share of $0.34 on revenue of $423.5 million. Analysts were looking for earnings to come in with earnings per share of $0.33 on revenue of $418.8 million. Comparable sales jumped 6%, thanks to online sales seeing a 31% increase year over year. For the second quarter, management forecasts revenue to come in between $440 million and $445 million and net income range of $0.31 to $0.33 per share. For full year results, management believes Lululemon could see revenues of $2-2.05 billion and a net income range of $1.86 to $1.91 per share. Lululemon’s previous full year estimates for revenue ranged from $1.97 billion to $2.02 billion and a net income range of $1.85 to $1.90 a share.
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Lululemon continues to see growth from men’s apparel
Lululemon is known for its line of athletic wear for women, most notably, yoga pants. However, as Lululemon continues to see its flagship product reach near full saturation and with a whole host of comparable products by competitors, the company continues to express interest in moving into men’s apparel. Most notably, Lululemon has been promoting its new ABC (“anti-ball crushing”) pants for men, which retail for around $120. However, the product is still relatively new and it has yet to be seen whether this will product will see the same success as some of the company’s other successful ideas.
Overall, over two years removed from the “pants-gate” scandal, it appears Lululemon is officially passing through the storm. The company posted a first quarter earnings beat and raised guidance for the second quarter and full year. Moving forward, the company must continue to put an emphasis on men’s wear and continued success with online sales.