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Lululemon Athletica finds some inner peace in 4Q

Lululemon Athletica shares jump as 4th-quarter results shows stabilization and revenue gains

Lululemon Athletica Inc. shares jumped Thursday after the yoga clothing company showed that it is has found some inner peace following a series of missteps over the last year.

The Canadian company's troubles started last spring when it pulled one of its popular yoga pants from stores because they were too sheer, which it blamed on a style change and production issues. Fixing the problem cost the company millions and made investors question quality control.

Lululemon's founder Chip Wilson stepped down just months later as chairman after his public comments suggested that the larger bodies of some consumers were to blame for other quality issues. It also lost its popular CEO Christine Day, which rattled investors. Day was replaced in January by Laurent Potdevin, the former CEO of Toms Shoes.

Potdevin said on a conference call Thursday that Lululemon is "reflecting on our learnings with humility and are entirely focused on our future." He described 2014 as an investment year in which the Vancouver company will focus on strengthening its foundation, reigniting its product creation and generating sustainable growth.

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Net income for its fourth quarter rose to $109.7 million, or 75 cents per share, from $109.4 million, or 75 cents per share, last year. Revenue jumped 7 percent to nearly $521 million from $485.5 million. That beat market expectations — analysts polled by FactSet were anticipating earnings of 72 cents per share on revenue of $514.9 million. Last year's quarter had ended by the time the company announced its see-through pants snafu and began to pull product. It also benefited from an extra week.

Lululemon's revenue did take a temporary hit during the past year, but its quarter ended Feb. 2 proved to be its strongest period yet.

The company earned $279.5 million, or $1.91 per share, for the full year. That is up from $270.6 million, or $1.85 per share, in the prior year. Its revenue from stores open at least a year increased 4 percent. This is considered a key indicator of financial performance because it strips away the impact of recently opened or closed sites. This measure fell 2 percent in its fourth quarter.

Looking ahead, the retailer said it expects to earn 31 to 33 cents per share for the first quarter on revenue between $377 million and $382 million. Analysts had forecast earnings of 38 cents per share on revenue of $388.6 million.

For 2014, Lululemon forecast earnings between $1.80 and $1.90 on revenue between $1.77 billion and $1.82 billion. Analysts had projected earnings of $2.13 per share on revenue of $1.82 billion.

Despite the lower-than-expected forecast, investors were pleased by the stabilization at the company.

Shares of Lululemon jumped $3.42, a 7 percent increase, to $51.65 by midmorning. As of Wednesday's close, its shares are down 23 percent for the past 52 weeks.