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Online surge drives Lululemon’s optimistic Q4 outlook

Athleisure retailer Lululemon has benefited from the holiday season, raising its guidance for both revenue and earnings for the fourth quarter ending February 3, 2019.

The retailer’s recently announced forecast comes about a month after it reported a surge in online traffic in the third quarter and posted a 76 percent increase in its e-commerce business in China.

Lululemon said it is now expecting a revenue in the range from $1.14 billion to $1.15 billion, up from its previous guidance of $1.12 billion to $1.13 billion.

The company said it now expects diluted earnings per share to be in the range of $1.72 to $1.74 for the fourth quarter based on a 30 per cent effective tax rate. This compares to the company’s previous diluted earnings per share guidance of $1.64 to $1.67 based on a 30 per cent effective tax rate.

“The momentum in our business remained strong throughout the holiday season, reflecting the ongoing success of our product offerings and our connection with guests around the globe,” said Calvin McDonald, Lululemon CEO.

The holiday shopping season is important for retailers as they record a significant portion of their annual sales, both in-store and online, during the period.

The retailer of yoga and athletic clothing said the guidance does not include certain discrete tax expenses related to US tax reform and repatriation which they stated they expect to recognise during the fourth quarter.

“This guidance also excludes the expected tax benefit from recent changes in legislation and guidance related to global intangible low-taxed income (“GILTI”) taxes,” the retailer said. “We are in the process of quantifying these items.”

Lululemon said their revised guidance for the fourth quarter continues to assume 133.0 million diluted weighted-average shares outstanding.

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