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Has Lululemon Finally Cracked?

January 15, 2013 | About:
matsandalex

matsandalex

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Shares of Lululemon (LULU) were sharply lower today (7%) after the company reported a lower-than-expected sales forecast

Revenue for the fiscal fourth quarter ended Feb. 3 will be at the “high end” of its original forecast of $475 million to $480 million, based on same-store sales, Lululemon said in a statement yesterday. Analysts had projected $489 million, the average of 22 estimates compiled by Bloomberg.

Not only are sales starting to level out, but LULU also expects that profits will only be 74 cents a share. Most analysts were looking for a few pennies more of profit.

LULU is clearly trying to play the game where it beat expectations in order to ramp the share price. Thus, it wanted to temper expectations ahead of its next earning result. It will be interesting to see if LULU low-balled analyst estimates.

However, sales growth is still impressive at 36% and margins are the highest in the retail industry.

Lululemon CEO Christine Day issued the revenue and profit warning and appeared to blame the "calendar compressed holiday" season:

"Our store managers, key leaders and educators stepped up and did a fantastic job this year as the calendar compressed holiday shopping patterns into a couple of key weeks. We are also pleased that our gross margin is running slightly ahead of plan, and that we are entering 2013 in a clean inventory position. Along with our new back to gym product, we are beginning to flow a beautiful new spring assortment into our stores this week and look forward to introducing new innovation and function to our guests in 2013."

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