Lululemon Stock Slumps on Cut in Earnings, Sales Forecast

Yogawear retailer Lululemon cuts forecast; shares slump
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By Ashutosh Pandey

Upscale yogawear retailer Lululemon Athletica cut its quarterly forecast as the company struggles with the lingering effects of an embarrassing recall and controversial comments by its founder, sending its shares down 15 percent.

Lululemon (LULU) has been under pressure since March after it recalled some of its signature black pants that proved too see-through.

"We were on track to deliver on our sales and earnings guidance through the month of December; since the beginning of January, we have seen traffic and sales trends decelerate meaningfully," Chief Financial Officer John Currie said in a statement.

Vancouver, British Columbia-based Lululemon warned last month that weaker sales would hit the crucial fourth quarter ending Feb. 2.

Several U.S. apparel retailers including American Eagle Outfitters (AEO) and Zumiez (ZUMZ) lowered their forecasts last week as reluctant shoppers forced them to offer steep discounts during the holiday shopping season.

Lululemon said it expected net revenue to be between $513 million and $518 million for the quarter, down from $535 million to $540 million it forecast earlier.

The company forecast same-store sales to decline in low-to-mid-single digits on a percentage basis, compared to its earlier forecast of flat sales. %VIRTUAL-article-sponsoredlinks%Lululemon said it expected to earn between 71 cents and 73 cents a share. The company had earlier forecast earnings of between 78 cents and 80 cents a share.

Analysts on an average were expecting earnings of 79 cents on revenue of $541.3 million, according to Thomson Reuters I/B/E/S.

Troubles at the company have been compounded by complaints about product quality and comments by outgoing chairman and founder Chip Wilson. He said in early November that some women's body shapes "just actually don't work" for Lululemon's yoga pants, prompting a backlash from some customers.

The company last month named Laurent Potdevin, former president at retailer Toms Shoes, as CEO.

Lululemon shares were trading at $51.60 before the bell, after closing Friday at $59.60 on the Nasdaq. They have fallen about 11 percent since the recall in March.

Originally published