(Adds forecasts, market reaction, detail on sales growth.)
TORONTO, Sept 1 (Reuters) - Canadian yoga wear retailer Lululemon Athletica Inc LULU.O reported an increase in quarterly earnings on Thursday as sales rose, but its shares fell after it forecast earnings in the current quarter would be at or below consensus.
The Vancouver-based company forecast fiscal third-quarter earnings between 42 cents and 44 cents a share. Analysts, on average, had been expecting earnings of 44 cents for that quarter, according to Thomson Reuters I/B/E/S.
Second-quarter sales at stores open at least a year rose 4 percent, excluding the impact of exchange rate changes, or 5 percent including direct to consumer or online sales. Lululemon forecast "mid-single digit" growth for the current quarter.
Analysts polled by research firm Consensus Metrix had expected same store sales to rise 2.8 percent, or 5.9 percent with direct to consumer sales included.
Once a market darling thanks to its successful move into the U.S. market, a feat few Canadian retailers pull off, the company has struggled with embarrassing product recalls and inventory problems in recent years.
Inventory levels fell 1 percent in the quarter, to $277.3 million.
The Vancouver-based company helped bring pricey women's yoga pants into the fashion mainstream before expanding into running and other sports. The company now makes men's clothing, and its Ivivva line offers athletic clothing for younger clientele.
It competes with Nike Inc (NYSE:NKE) NKE.N and Under Armour Inc (NYSE:UA) UA.N , as well as mainstream clothing retailers from Gap Inc (NYSE:GPS) GPS.N to Nordstrom (NYSE:JWN) JWN.N , that have added yoga wear to their offerings since Lululemon became a major player.
Net income rose to $53.6 million, or 39 cents a share, from $47.7 million, or 34 cents, a year earlier. Revenue rose 14 percent to $514.5 million. Excluding a tax and related interest adjustment, earnings were 38 cents a share.
On average, analysts had been expecting earnings of 38 cents a share and revenue of $515.5 million, according to Thomson Reuters I/B/E/S.
Shares dropped 7.5 percent to $70.94 in after market trading.