On Thursday morning, Lululemon reported better-than-expected holiday-quarter earnings as consumers responded to new product innovations such as hidden pockets in pants and brighter-colored shirts. Same-store sales rose 8%, higher than consensus forecast of 6.8%.
But despite consumers once again embracing pricey threads from Lululemon after several high-profile product missteps in 2013 and 2014, the company took a cautious view on the year. The company said it expects earnings for the first quarter to be in the range of 31 cents a share to 33 cents a share versus analyst estimates for 39 cents a share.
However, investors still sent the stock higher -- Lululemon shares were trading up more than 7.5% to $65.56 in recent trading Thursday.
Here's what an excited Wall Street likely saw in the numbers.
1. Women are coveting expensive Lululemon yoga pants again.
After spending a year addressing product quality issues, including an embarrassing problem with its female pants being too sheer, Lululemon has gotten back to offering the innovative styles its yoga moms have come to expect, As a result, its signature pricey pants are once again in high demand. According to execs on its earnings call, sales of female bottoms rose by a "double-digit" percentage during the holiday quarter. Same-store sales for women's products overall were "positive," according to the company.
2. Weather is fleeting but true demand isn't.
Investors have likely chosen to look beyond the disappointing first-quarter guidance because the underlying demand for Lululemon products continues to be healthy. Lululemon said traffic to its stores continued to get stronger into the first quarter. Further, average unit retail prices have risen slightly in the first quarter and more shoppers were converted to buyers when visiting the store.The company's lowered guidance could prove to be conservative when all is said and done.
3. More product innovation is on the way.
With its operational house in order under new CEO Laurent Potdevin and a host of other new executives, Lululemon has set its sights on innovating in areas beyond just pants. The next area that will be addressed soon are tank tops. In the second quarter, Lululemon plans to offer four new female tank styles that boast greater support. Tara Posely, Lululemon's chief product officer, noted these "full support tanks" will offer a mixture of technical and beauty features.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.