Lululemon Athletics (LULU) shares surged higher Friday after the casual and sports apparel group posted stronger-than-expected second quarter earnings and boosted its full-year profit forecast.
The Vancouver-based retailer earned an adjusted $2.20 per share on sales of $1.87 billion for the three months ending in July, topping Street forecasts for the ninth consecutive quarter, with sold sales growth in both north America and its international markets.
Freight costs continued to pressure gross margins, however, which fell 160 basis points to 56.5%. That trend looks likely to continue into the back half of the year, Lululemon said, and decline by another 1% to 1.3%.
With CEO Calvin McDonald said the group was seeing any "meaningful variation in cohort behavior", Lululemon boosted its 2022 profit outlook to by 40 cents per share, to a range of $9.75 and $9.90, with revenues expected between $7.87 billion and $7.94 billion.
"Lululemon remains predominantly a full-price business, and we have not changed our promotional cadence or markdown strategy and we have no plans to do so," McDonald told investors on a conference call late Thursday.
"Like others in the industry, we continue to navigate challenges throughout the supply chain," he added. "That said, we are pleased to see some promising signs of improvement yet recognize further normalization within the supply chain will take some time."
Lululemon shares were marked 10.2% higher in early Friday trading to change hands at $324.25 each, a move that would trim the stock's year-to-date decline to around 15%.
"We think the second quarter result are a testament to the strength of the brand and underscore our belief that Lululemon is well positioned amid a difficult macro environment," said KeyBanc Capital Markets analyst Noah Zatzkin, who boosted his price target on the stock by $25, to $375, following last night's earnings.
"We think innovation in new product categories, such as footwear, as well as in accessories will serve as meaningful long-term growth drivers," he added.
