Lululemon Athletica Inc.
) tanked 18.7% since it posted its third quarter fiscal 2013
results on Dec 12, 2013.
Lululemon has been in troubled waters since Mar 2013 when the
company was forced to recall its Black Luon yoga pants and crops
from its stores and e-Commerce site due to quality related
issues. This created a lot of buzz, which coupled with
controversial comments from Lululemon's founder that hurt the
sentiments of its women customers, led to lower traffic trends in
the company's stores throughout 2013, thus, impacting the overall
Moreover, sales of Lululemon have been declining since the
beginning of this year due to the impact of the polar vortex,
which severely impacted regions with a significant number of
Lululemon stores. This compelled management to trim its sales and
earnings outlook for the fourth quarter of fiscal 2013.
The company now projects fourth-quarter revenues in the range of
$513-$518 million compared to the previous forecast of $535-$540
million. Revenue forecast is based on constant-dollar comparable
store sales (comps) decline in the low-to-mid single-digits
range, against the prior projection of flat comps.
As a result, the company has lowered its earnings per share
guidance to range from 71-73 cents a share, while it earlier
anticipated earnings of $0.78-$0.80 per share. The current Zacks
Consensus Estimate for the fourth quarter is pegged at 72 cents a
share, falling within the company's range.
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Taking a cue from the company's warning of weakened results in
the upcoming fourth quarter, the Zacks Consensus Estimate for
Lululemon has been witnessing a downtrend, as over the last 90
days estimates have declined 3.6% to $1.89 for fiscal 2014 and
11.6% to $2.20 for fiscal 2015.
Apart from these headwinds, the company is struggling to save its
market share from competitors which are foraying into the
activewear product line. Nevertheless, Lululemon is encouraged to
see that the investments to strengthen and enhance its back-end
product operations structure are starting to pay off. While the
company believes that the full realization of these benefits is
still a long way, it continues to stringently focus on the
successful execution of its long-term strategic plans.
Lululemon currently holds a Zacks Rank #4 (Sell). Other
better-ranked stocks in the same industry include
Christopher & Banks Corp.
), with a Zacks Rank #1 (Strong Buy),
Belle International Holdings Ltd
H & M Hennes & Mauritz AB (publ)
), both holding a Zacks Rank #2 (Buy).