UPDATE 2-Lululemon expects better margins to boost profit this year

(Adds details, CFO comments)
March 30 (Reuters) - Canadian retailer Lululemon Athletica
Inc LULU.O said it expected improved margins and sales to
drive its earnings growth this year, sending its shares up 10
percent in morning trading.
The company reported a higher-than-expected quarterly profit
on Wednesday, helped by strong sales during the holiday shopping
period.
Lululemon, known for its upscale yoga-wear, said it planned
to improve margins by reining in costs through a shift to ocean
freight from air freight and planning orders better to ensure
fewer cancellations.
"We now see our plans for a recovery in profitability coming
into sharper focus," Chief Financial Officer Stuart Haselden
said on a post-earnings conference call.
Haselden said the first quarter would mark the last step in
Lululemon's transition to regaining earnings growth as the
company works to reduce inventory levels and strengthen supply
chain capabilities.
Lululemon reported gross margin of 50.3 percent for the
fourth quarter ended Jan. 31, up from 46.9 percent in the
previous quarter.
The company, which competes with Nike Inc (NYSE:NKE) NKE.N and Under
Armour Inc UA.N in the lucrative athleisure market, said it
planned to more than double its earnings by 2020.
Athleisure is a mix of athletic and casual clothing that has
grown popular even in formal settings in the United States.
Lululemon reported earnings of 85 cents per share in the
quarter, beating analysts' average estimate of 80 cents,
according to Thomson Reuters I/B/E/S.
The company forecast higher net revenue in the range of
$2.29 billion-$2.34 billion for the full year, compared with the
previous year, saying it expects total comparable sales to
increase by a mid-single digit percentage on a constant dollar
basis. It expects earnings of $2.05-$2.15 per share.
The retailer reported net revenue of $2.06 billion for the
year ended Jan. 31, and earnings per share of $1.89.
Comparable store sales for the fourth quarter rose by 5
percent on a constant dollar basis, beating analysts' average
estimate of 4.70 percent, according to Consensus Metrix.
Net income rose about 6 percent to $117.4 million in the
quarter from $110.9 million, or 78 cents per share, a year
earlier.
Lululemon shares were up 8.6 percent at $66.58 in late
morning trading.