Lululemon Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of yoga-gear specialist lululemon athletica (NAS: LULU) sank 11% today after its quarterly sales and outlook missed Wall Street expectations.

So what: Lululemon's third-quarter profit rose a whopping 51%, but a miss on revenue -- $230.2 million versus the consensus of $235.7 million -- suggests that its breakneck growth is slowing. Lululemon shares have skyrocketed over the past couple of years, baking in plenty of optimism along the way, so it's no surprise that Mr. Market is punishing even the slightest of hiccups.

Now what: "As we finish 2011, we are positioned where we want to be -- we continue to perform at the top of our sector and remain focused on our four strategic growth priorities, driving comparable-store sales, e-commerce, new stores and preparing for international expansion," CEO Christine Day said. But while Lululemon remains a great growth story, today's sell-off shows what kind of lofty expectations investors already have for it. Given the increasing competition in women's athletic apparel from the likes of Nike (NYS: NKE) and Gap (NYS: GPS) , Lululemon's valuation still doesn't seem to offer a big enough margin of safety.

Interested in more info on Lululemon?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of lululemon athletic and Gap. Motley Fool newsletter services have recommended buying shares of lululemon athletica and Nike, as well as creating a diagonal call position in Nike. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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