Lululemon's (LULU) stock surged as much as 16% on Friday after the athleisure retailer raised its guidance amid strong sales in China and lower freight costs.
The company's latest quarterly results defy trends in the broader market of a more cautious consumer, especially when it comes to discretionary items.
Revenue increased 24% year-over-year to $2 billion. North America sales grew 17% while international sales grew 60%.
“Within international, we saw a meaningful acceleration in the Greater China business with revenue increasing 79%,” Lululemon CEO Calvin McDonald said during the company’s earnings call.
Lululemon is planning 30-35 new store openings this year, with the majority of those in China.
Lower air freight costs also helped boost product margin. The retailer forecasts gross margins for the full year to increase between 180 to 200 basis points versus 2022.
“The expansion relative to last year is driven predominantly by lower airfreight expense. For the full year, we now expect airfreight to be down approximately 190 basis points versus 2022,” CFO Meghan Frank told analysts during the earnings call.
The company's results and guidance was largely well received by analysts. The stock has 23 Buy recommendations, 7 Hold, and 4 Sell.
"LULU continues to impress despite the US consumer backdrop proving challenging for many," wrote Stifel analysts in a note to investors.
"Mindful of consumer and macro uncertainty, we are maintaining conservative projections but again raising estimates. We see capacity for further increases as the year unfolds, remain comfortable with our BUY rating, and continue to view LULU shares as an attractive core holding for large cap growth investors," said the note.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
Read the latest financial and business news from Yahoo Finance