Lululemon ( LULU ) reported third-quarter results after the closing bell on Thursday that beat both the top and bottom lines, sending the company’s shares higher in after-hours trading.
Shares of Lululemon rose more than 8% as the company also raised its full-year sales and earnings guidance for 2024.
Still, sales growth in North America fell again as the retailer grapples with concerns about increased competition ahead of the crucial holiday shopping season.
Revenue came to $2.40 billion, up from the $2.20 billion reported in the third quarter of 2023. Analysts polled by Bloomberg had expected $2.36 billion, after the retailer forecast sales of between $2.34 billion and $2.37 billion.
Earnings exceeded expectations of $2.75 per share to $2.87. This was also higher than the $2.53 earnings per share the company reported in the same period last year.
The company targeted fourth-quarter revenue of $3.48 billion-$3.51 billion, compared to consensus estimates of $3.5 billion. The company also expects fourth-quarter earnings per share to be between $5.56 and $5.64, below estimates of $5.70.
For the full year, the retailer raised its net sales guidance to between $10.45 billion and $10.49 billion, up from the previous range of $10.38 billion to $10.48 billion. The earnings per share forecast was also revised upward to a range of $14.08-$14.16 for the year, up from the previous $13.95-$14.15.
“Our third quarter performance demonstrates the continued strength of lululemon globally, as we saw continued momentum in our international markets and in Canada,” Lululemon CEO Calvin McDonald said in the earnings release.
“As we look to the future, we are excited about the start of our holiday season, and we remain focused on accelerating our U.S. operations and growing our brand awareness around the world.”
Gross margins improved on a sequential basis, increasing 150 basis points to 58.5%, compared to an increase of 80 basis points in the second quarter. The company also said it approved a $1 billion increase in its stock buyback program on December 3.
The report notes that the stock was one of the worst performing stocks in the S&P 500 (^GSPC) this year, down more than 30%. newer brands such as Alo and Vuori gain market share with trendy styles and products.
Shares have also significantly underperformed the Consumer Discretionary sector (XLY), which is up about 27% over the same period.
And while stocks have recovered from the four-year low they hit over the summer, analysts have pointed to increased short-term interest rates as a catalyst, making the long-term fundamental story all the more important.