What happened

Shares of lululemon athletica inc. (NASDAQ:LULU) were up 12.8% as of 12:30 p.m. EDT Friday after the yoga apparel retailer announced better-than-expected fiscal first-quarter results, plans to restructure its ivivva operations, and increased its full-year earnings guidance.

So what

Quarterly revenue climbed 5% year over year to $520.3 million, including a comparable sales decline of 1%. That translated to GAAP net income of $31.2 million, or $0.23 per share. On an adjusted basis, which excludes items like restructuring expenses, net income increased 8.3% to $44.3 million, or $0.32 per share. Analysts, on average, were only expecting adjusted earnings of $0.28 per share on revenue of $514 million.

A woman doing yoga in Lululemon clothing.

Image source: lululemon athletica.

Lululemon also announced plans to restructure its ivivva operations -- a brand that focuses on activewear for girls -- as primarily an e-commerce business, while still operating a "select number of stores in key communities across North America." Lululemon will close roughly 40 of its 55 ivivva-branded stores, and will convert roughly half of the remaining locations to Lululemon stores. Further, Lululemon says this restructuring should be "substantially complete" by the end of its fiscal third quarter this year.

Lululemon CEO Laurent Potdevin stated:

I'm excited to see the positive trends that materialized late in Q1 continuing into Q2. Our current outlook for the remainder of 2017 is strong, and I'm energized by the growth strategies taking shape. I'm also confident in our plans to restructure ivivva and believe they are the best means to optimize this part of the business. From our cadence of product innovation, to our enhanced digital experience, and first-ever global brand campaign, we have never felt more deeply connected to our guest or better positioned to expand our collective. We remain laser focused on owning our position as the global brand defining an active, mindful lifestyle.

Now what

For the current quarter, Lululemon expects revenue of $565 million to $570 million, assuming a total comparable sales increase in the low- to mid-single digit percent range at constant currency. Excluding costs related to the ivivva restructuring, that should translate to adjusted earnings per share (EPS) of $0.33 to $0.35. By contrast, Wall Street was modeling lower fiscal Q2 revenue of $560.2 million, and higher adjusted earnings of $0.41 per share.

For the full fiscal year, however, Lululemon now expects revenue of $2.53 billion to $2.58 billion (a reduction from previous guidance of $2.55 billion to $2.6 billion), assuming a low-single-digit increase in comparable-store sales at constant currency. That should result in full-year adjusted EPS of $2.28 to $2.38, an increase from previous guidance for full-year adjusted EPS of $2.26 to $2.36.

In the end, the market is rightly pleased with Lululemon's planned restructuring efforts and its relative outperformance to start the fiscal year. And though it reduced its full-year revenue guidance slightly, that's understandable given the impending closure of many of its ivivva locations in favor of focusing the brand on its higher margin, higher growth e-commerce opportunity. Combined with Lululemon's increased full-year earnings guidance, and with shares trading near 52-week lows going into this report, it's no surprise to see Lululemon stock climbing higher today.

Steve Symington owns shares of Lululemon Athletica. The Motley Fool owns shares of and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.