(Reuters) -Lululemon Athletica Inc forecast annual sales and profit above Wall Street estimates on Tuesday, betting on strong demand for its pricier yoga wear even as inflation hurts consumer spending, sending its shares up about 9% in extended trading.
Even as stubbornly high prices of essential goods force customers to cut down on discretionary purchases such as apparel, wealthier shoppers are still spending on Lululemon’s tops, yoga pants and shorts, bolstering traffic both online and in stores.
While Lululemon has offered more discounts to clear excess inventories, analysts have noted that the company’s top-selling products and core categories are still selling at full price, with promotions centered around accessories such as footwear and bags.
Lululemon’s Align high-rise yoga pants, listed among the best-selling items on its website, retails between $98 and $118.
The company has also been launching new products to lure in more customers, stocking up its store shelves with products in new Spring season colors.
Higher discounts, however, have eaten into its margins. Lululemon reported a 300-basis-point decline in fourth-quarter gross margin at 55.1%. The company’s inventories at the end of 2022 swelled by 50% to $1.4 billion.
The athleisure clothing maker, however, issued upbeat forecasts for the first quarter, and topped expectations for holiday-quarter results.
Vancouver, Canada-based Lululemon said it expects fiscal 2023 revenue between $9.30 billion and $9.41 billion, compared with analysts’ average estimate of $9.14 billion, according to Refinitiv IBES data.
The company expects full-year profit in the range of $11.50 to $11.72 per share, compared with analysts’ estimate of $11.26 per share.
Excluding items, Lululemon earned $4.40 cents per share in the fourth quarter ended Jan. 29, beating analysts’ estimate of $4.26 per share.
(Reporting by Deborah Sophia in Bengaluru; Editing by Shilpi Majumdar)