Lululemon Athletica Inc. expects fourth quarter sales to surpass the market’s expectations, showing the upscale activewear brand is fending off upstart competitors and slower growth in consumer spending.

Lululemon Athletica and Abercrombie & Fitch raised their current-quarter sales targets on Monday, helped by demand for heavily discounted apparel during the holiday season, even as steep promotions took a bite out of some retailers' margins.

Lululemon struck a cautious tone in the lead up to the holiday shopping season but said that its results were better than expected.