Why it's a good sign that people are willing to pay $90 for Lululemon yoga pants

McKenzie DeGroot
Segment Producer

Lululemon (LULU) shares hit a record high on Monday after the athletic wear maker boosted its earnings and revenue guidance for the fourth quarter.

Growth for the apparel maker has been fueled by its online presence that helped drive up holiday shopping sales during the all-important gift-giving months. It's now forecasting earnings 12 cents higher, between $2.22 and $2.25 a share.

Lululemon’s strong performance might just be a positive sign for the rest of the higher-end retail industry, UBS Head of Equity Derivatives Research Stuart Kaiser told On The Move on Monday.

“Seeing enough of these higher end retailers still producing, you know, pretty strong results, a lot of investors are going to say, ‘We know the JCPenney's are pretty challenged, but if people are paying 50 bucks for yoga pants, then you know, the U.S. consumer is potentially or practically remaining strong,’” he adds. (Yahoo Finance’s Heidi Chung corrected him to say that a pair of athletic tights there actually runs closer to $90.)

Yogawear retailer Lululemon Athletica Inc's logo is pictured at its store in downtown Vancouver June 11, 2014. REUTERS/Ben Nelms (CANADA - Tags: BUSINESS LOGO)

What’s Lululemon doing right? A few things, including working to grow its men’s segment, creating a loyalty program to make customers committed to the brand, and enhancing its in-store experience. The strategies appear to be working: The company’s stock is up nearly 70% in the last year.

But Lululemon, which is expected to report fourth quarter earnings on March 27, is not the only retailer to report have a positive outlook. Also on Monday, Crocs (CROX) raised its own revenue guidance, in another sign that the consumer is thriving.

“The U.S. consumer has been the white knight of the global economy for, you know, years and years and years,” Kaiser stated.

McKenzie DeGroot is a producer at Yahoo Finance. Follow her on Twitter: @degrootmckenzie

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