NEW YORK ( TheStreet) -- The heady sales growth that made Lululemon ( LULU) a Wall Street darling for several years may be gone, but signs of a potential turnaround have gotten investors excited again.
"The third-quarter marked a key inflection point in the women's business," said Lululemon CEO Laurent Potdevin on a conference call Thursday morning. Potdevin attributed the turning of the page at Lululemon, following a year of product stumbles, to more appealing products that led to higher sales each month of the quarter.
Lululemon's retiring CFO John Currie followed that up by noting store traffic not only increased in the third quarter, but was stronger than the rise seen in the second quarter. Considering that declining traffic to U.S. malls continues to cause financial headaches for a majority of apparel retailers, the comments from Lululemon's top-two executives was welcome news. The company also said online sales surged by 27%, with Lululemon's online business now representing 18.4% of total sales.
Lululemon shares spiked more than 9% in midday trading as the latest news was enough for investors to overlook another sluggish quarter for store sales and a weak short-term outlook. Sales from Lululemon's physical stores declined 3% in the third-quarter, and year to date, store sales have fallen 4%. Lululemon expects fourth-quarter net revenue in the range of $570 million to $585 million and EPS of 65 cents a share to 69 cents a share. The Street was looking for sales of $593 million and earnings of 72 cents a share.
Getting new products into the stores and online for women that highlight things like sparkles, sequin patterns, and various textures was hinted at as the reason for the yoga-faithful returning. According to Lululemon's chief product officer Tara Posely, the investments in new fabrics are part of a "complete rebalancing" of the company's merchandise assortment. The goal is to infuse Lululemon's store racks and digital pages with more stylish tops, yoga pants and running shorts.
In effect, Lululemon may be on the road to once again differentiating itself from the endless wave of new, stylish female athletic wear that is hitting the market from powerhouses Nike ( NKE) and Under Armour ( UA) .