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

Lululemon (LULU) reported third-quarter results after the closing bell on Thursday that beat both revenue and profit, as guidance also came in stronger than expected.

However, sales growth in North America fell again as the retailer grapples with concerns about increased competition as the critical holiday shopping season begins.

Revenue was $2.40 billion, up from $2.20 billion in the third quarter of 2023. Analysts polled by Bloomberg expected $2.36 billion after the streamer reported revenue 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. Shares rose more than 4% immediately after the results.

The company forecast fourth-quarter revenue of $3.48 billion to $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 forecast to $10.45 billion to $10.49 billion, from $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.”

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 capture 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.

Same-store sales were hit particularly hard in North America, with the metric falling another 2% after domestic same-store sales fell 3% in the second quarter.

Total same-store sales increased 4%, driven by international markets. Analysts had expected year-on-year growth of 2.5%.

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