Lululemon Athletica inc. stock tumbles after soft guidance
Lululemon reported fourth-quarter revenue of $789.9 million on Wednesday afternoon, topping consensus analyst forecasts of $783.5 million. The company also reported earnings per share of 99 cents, just shy of consensus estimates of $1.01.
The market is reacting negatively to Lululemon's updated 2017 guidance and commentary from CEO Laurent Potdevin on the company's earnings call.
"Although we've had a slow start to 2017, our teams are passionately committed to delivering on our robust plans across product innovation, digital, North America and international as we realize our ambitious vision for the future," Potdevin said.
While Potdevin tried to put a positive spin on Lululemon's soft guidance, Wall Street analysts were not fooled.
Deutsche Bank analyst Paul Trussell lowered the firm's price target for Lululemon stock from $65 to $58. Trussell said the company's earnings forecast for fiscal 2017 "fell well below expectations, and hopes for margin expansion this year have evaporated."
Credit Suisse also lowered its price target for Lululemon from $64 to $56. Analyst Christian Buss previously projected comparable same-store sales growth of 2 to 3 percent for fiscal 2017 but has now lowered his estimate to zero to 1 percent growth.
In addition, Buss says investors should now expect "limited margin expansion for the year."
Jefferies analyst Randal Konik cut his price target for Lululemon from $64 to $54. After the disappointing earnings report, Konik says athletic apparel investors currently have better opportunities elsewhere.
"Looking ahead, we see a classic case of slowing momentum and negative EPS revisions," Konik says of Lululemon.
Jefferies' top pick in the athletic apparel space is Nike (NKE), based on its superior product innovation and pricing power. Jefferies also recently upgraded Under Armour (UA, UAA) to "buy" due to its attractive valuation relative to peers and its long-term global scaling opportunities.
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