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Lululemon raises full-year forecast as athleisure demand takes hold

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(Reuters) -Lululemon Athletica Inc raised its full-year forecast on Wednesday, after beating revenue and profit estimates on strong demand for its comfortable leggings and sports bras, sending the apparel maker’s shares up nearly 12%.

People walk past a store by yogawear retailer Lululemon Athletica in New York City, U.S., March 30, 2017. REUTERS/Brendan McDermid

Sportswear makers saw strong demand over the past year as people worked out at home during the COVID-19 pandemic, spurring sales of Lululemon and other athletic wear makers, including Nike Inc and Under Armour Inc.

However, apparel makers are now facing supply chain hiccups due to the new coronavirus-led lockdowns in Vietnam, as they rely heavily on the southeast Asian country for manufacturing.

“Another wave of COVID-19 and related factory closures in Vietnam, ongoing issues at the ports and reduced air freight capacity are contributing to some disruptions within the supply chain as well as increased costs,” Calvin McDonald, Lululemon’s chief executive officer, said in a post-earnings call.

“It’s fair to say that our business would have been even stronger without these (supply chain) challenges facing the industry.”

The company, however, said it was working on shifting production out of Vietnam wherever possible, increasing the use of air freight and prioritizing production for key fall holiday styles to mitigate its supply chain woes.

The owner of Mirror home-fitness platform said it now expects annual net revenue to be in the range of $6.19 billion to $6.26 billion, compared with its prior range of $5.83 billion to $5.91 billion.

Lululemon forecast full-year adjusted earnings per share to be between $7.38 and $7.48, compared with its prior range of $6.73 to $6.86.

Net revenue rose by 61% to $1.45 billion in the second quarter, beating estimates of $1.34 billion, according to IBES data from Refinitiv.

On an adjusted basis, Lululemon earned $1.65 per share, compared with estimates’ of $1.19 per share.

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