Lululemon Beats Street Without Markdowns

TORONTO ( TheStreet) -- Despite Lululemon Athletica ( LULU) posting better-than-expected third-quarter earnings, shares of the yoga-inspired retailer are slipping.

During the quarter, profit spiked nearly 60% to $14.1 million, or 20 cents a share, compared with $8.8 million, or 13 cents, in the year-ago period. Analysts expected a profit of 19 cents a share.

Revenue jumped almost 30% to $112.9 million, while same-store sales gained 10%.

"An enhanced operating system allowed Lululemon to operate with leaner inventory and to chase merchandise in season," Stifel Nicolaus analyst Richard Jaffe wrote in a note. "Aided by the intelligence provided by the sales trends, management was able to buy merchandise more effectively: maximizing sales, while mitigating markdown risk."

Lululemon also benefited from its new running line and seasonal outerwear.

Looking ahead, the company forecast fourth-quarter earnings in the range of 26 cents to 28 cents a share, in-line with analysts' estimates.

Lululemon's biggest problem (one more retailers wished they had), is keeping items in stock, said Jennifer Black, analyst at the firm bearing her name.

"Last year, out-of-stock items, particularly small sizes, posed a problem," she wrote. "This year, they've addressed this concern, however, with the increase in demand there are still stocks out in smaller sizes."

Shares of Lululemon are off 3.1% to $26.82 in morning trading.

-- Written by Jeanine Poggi in New York

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