Lululemon holds back forecast on virus uncertainty as results beat

(Reuters) – Lululemon Athletica Inc beat analysts’ estimates for quarterly results on Thursday, lifted by strong holiday season demand, but the athletic apparel maker did not provide a full-year forecast as the coronavirus outbreak fuels uncertainty.

Shares of the Vancouver-based company fell about 3% after the closing bell.

The company is seeing stay-at-home consumers buying more yoga mats and blocks, Chief Executive Officer Calvin McDonald told analysts on a post-earnings call, but online growth has not been enough to counter volumes lost from the store closures.

In China, where Lululemon operated nearly 40 stores, the company has already reopened most stores except one in Wuhan, the epicenter of the outbreak, which is expected to open next week.

The company said it is planning for stores in North America to be closed for longer than they were in China.

Lululemon, which has been streaming its popular yoga classes on social media following the store closures, said it would consider redeploying some of those marketing dollars to drive its online business.

“We know that initially, the business will be lower than it was pre-COVID-19 but we believe that each day and each week, it will keep building,” McDonald said.

Gabriella Santaniello, founder of retail consulting firm A Line Partners, said Lululemon’s efforts to stream yoga classes online and their ability to build a sense of community among customers would be an advantage as it looks to weather the hit from the health crisis.

“Lululemon started as a yoga company and you can actually do yoga inside!”

Like all retailers, the Canadian company has shut its stores across the world and focused on selling through its online platform as authorities clamp down on travel and lockdown cities to contain the spread of the coronavirus, which causes the respiratory illness COVID-19.

“We are planning for multiple scenarios,” McDonald added, without providing more details.

Strong digital sales had also helped larger rival Nike Inc beat estimates for its third-quarter and the company also held back from providing an outlook for its current-quarter. [nL4N2BH527]

Lululemon’s total revenue rose 19.7% to $1.40 billion in the fourth quarter ended Feb. 2. Analysts on average had estimated revenue of $1.38 billion, according to IBES data from Refinitiv.

Total comparable sales jumped 20% in the quarter.

The company’s net income rose to $298 million, or $2.28 per share, from $218.5 million, or $1.65 per share, a year earlier. [nBw6jGhSJa]

Analysts had expected a profit of $2.24 per share.

(Reporting by Nivedita Balu in Bengaluru; Editing by Maju Samuel and Sriraj Kalluvila)