Lululemon gives upbeat forecast on strong activewear demand

Lululemon Athletica Inc forecast annual revenue and profit above estimates on Wednesday, as demand for its comfortable leggings and sports bras remained strong despite the easing of coronavirus restrictions.

Shares rose 13% to $430.62 after the company also posted better-than-expected quarterly results. Investors traded more than $500 million worth of shares after the bell, according to Refinitiv data.

Sportswear makers saw strong demand over the past year as people worked out at home during the COVID-19 pandemic, spurring sales of Lululemon and other athletic wear makers, including Nike Inc and Under Armour Inc.

However, apparel makers are now facing supply chain hiccups due to the new coronavirus-led lockdowns in Vietnam, as they rely heavily on the southeast Asian country for manufacturing.

Photo Credit: Pexels

“Another wave of COVID-19 and related factory closures in Vietnam, ongoing issues at the ports and reduced air freight capacity are contributing to some disruptions within the supply chain as well as increased costs,” Calvin McDonald, Lululemon’s chief executive officer, said in a post-earnings call.

The company, however, added it was working on shifting production out of Vietnam wherever possible, increasing the use of air freight and prioritizing production for key fall holiday styles to mitigate its supply chain woes.

The owner of Mirror home-fitness platform said it now expects annual net revenue to be in the range of $6.19 billion to $6.26 billion, above estimates of $5.94 billion.

Lululemon forecast full-year adjusted earnings per share to be between $7.38 and $7.48, compared with the average analyst estimate of $6.91.

Net revenue rose by 61% to $1.45 billion in the second quarter, beating estimates of $1.34 billion, according to IBES data from Refinitiv.

On an adjusted basis, Lululemon earned $1.65 per share, compared with estimates of $1.19 per share.

(Reporting by Mehr Bedi in Bengaluru; Additional reporting by Noel Randewich; Editing by Amy Caren Daniel)