Lululemon shares are rising on earnings growth as the company raises its full-year outlook

Lululemon (LULU) reported third-quarter results after the closing bell on Thursday that topped both revenue and profit, sending the company’s shares higher on Friday.

Lululemon shares rose over 17% in early trading as the company also raised its full-year 2024 sales and profit forecasts.

Still, North American sales growth fell again as the retailer grapples with concerns about increased competition heading into the critical holiday shopping season.

Sales were $2.4 billion, up from $2.2 billion in the third quarter of 2023. Analysts polled by Bloomberg had expected $2.36 billion after the retailer reported sales between 2.34 and 2.37 billion US dollars had forecast.

Earnings beat estimates of $2.75 per share and reached $2.87. This was also above the EPS of $2.53 that the company reported in the year-ago period.

The company forecast fourth-quarter revenue of $3.48 billion to $3.51 billion, compared with 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 forecast to $10.45 billion to $10.49 billion, up from the previous range of $10.38 billion to $10.48 billion. The earnings per share forecast was also raised to a range of $14.08 to $14.16 for the year, up from the previous $13.95 to $14.15.

“Our third quarter performance demonstrates Lululemon’s continued strength globally as we experienced continued momentum in our international markets and in Canada,” Lululemon CEO Calvin McDonald said in the earnings release.

“Looking forward, we are pleased with the start of our holiday season and remain focused on accelerating our U.S. business and increasing our brand awareness around the world.”

Gross margins improved sequentially, increasing 150 basis points to 58.5%, compared to an 80 basis point increase in the second quarter. The company also said it agreed to a $1 billion increase in its stock repurchase program on Dec. 3.

At the start of the report, the stock was among the worst performers in the S&P 500 (^GSPC) this year, falling over 30% as newer brands like Alo and Vuori grabbed market share with trendier styles and products.

The stocks also significantly underperformed the consumer discretionary sector (XLY), which gained about 27% over the same period.

And although the stock has recovered from four-year lows hit in the summer, analysts have pointed to increased interest at the short-term level as a catalyst – making the long-term fundamental story all the more important.

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