What happened

Shares of lululemon athletica (NASDAQ:LULU) were down 12.6% as of 3:15 p.m. EST Friday after the yoga apparel specialist announced strong fiscal third-quarter results, but followed with conservative guidance.

Lululemon's quarterly revenue climbed a healthy 21% year over year to $747.7 million, which translated to a 34% increase in adjusted earnings to $0.75 per share. Both figures arrived well above Lululemon's latest guidance, which called for revenue of $720 million to $730 million, and earnings of $0.65 to $0.67 per share.

Woman performing yoga pose wearing black lululemon top


So what

Lululemon's growth was driven by a combination of new locations and a 17% increase in total comparable sales. Within the latter, the retailer saw comparable-store sales climb 6%, while direct-to-consumer net revenue soared 44% to comprise more than a quarter of its total top line.

"lululemon has achieved a high level of success over the past year and has established a solid foundation to continue to build our future," said Lululemon CEO Calvin McDonald. "It's been exciting to see guests around the world respond so strongly to our product offerings and improved digital experience."

If that wasn't enough, Lululemon raised its full-year outlook to a call for revenue of $3.235 billion to $3.245 billion (up from $3.185 billion to $3.235 billion before), and for full-year earnings of $3.61 to $3.64 per share (up from $3.45 to $3.53 per share previously). 

Now what

It appears, however, that Lululemon's boosted guidance stems entirely from its relative third-quarter outperformance. The company sees fourth-quarter revenue arriving in the range of $1.115 billion to $1.125 billion, with earnings per share of $1.64 to $1.67 -- with the midpoints of both ranges falling roughly in line with consensus expectations.

It's worth noting that Lululemon initially traded up slightly this morning, only to steadily drift lower throughout the day as the broader stock market endured steep losses to end the week. With shares up nearly 65% year to date prior to this report, it seems Lululemon's conservative holiday-quarter guidance just wasn't enough to appease short-sighted traders today.

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