Lululemon Tumbles on Weak Guidance - Analyst Blog


Shares of Lululemon Athletica Inc. ( LULU ) tumbled by a significant 16.6% during yesterday's trade after the company slashed its fourth-quarter fiscal 2013 guidance, citing a tremendous fall in customer traffic and sales trends since the start of January.

The news arrived right before the company's scheduled analysts and investors presentation at the ICR XChange Conference in Orlando, Fla. this week.

Lululemon 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 between 71 cents and 73 cents, while it earlier anticipated earnings of 78-80 cents per share.

However, the company retained its forecast for shares outstanding at 146.0 million and tax rate guidance of 30.0%.

Looking at its performance in the first two months of the quarter, the company remained confident of achieving its previously stated sales and earnings target. However, the deteriorating sales and traffic trends in January and the expected continuation of this trend through the rest of the month forced the company to revise its guidance.

Nevertheless, the company 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.

Other Stocks to Consider

Lululemon currently holds a Zacks Rank #3 (Hold). Better-ranked stocks among apparel/shoe retailers are Finish Line Inc. ( FINL ), The Men's Wearhouse Inc. ( MW ) and Shoe Carnival Inc. ( SCVL ). All these stocks have a Zacks Rank #2 (Buy).

FINISH LINE-CLA (FINL): Free Stock Analysis Report

LULULEMON ATHLT (LULU): Free Stock Analysis Report

MENS WEARHOUSE (MW): Free Stock Analysis Report

SHOE CARNIVAL (SCVL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: FINL , LULU , MW , SCVL

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