Lululemon shares plunge in after hours trading after warning of sluggish start

“Lululemon is now coming up against tougher comparatives which will make growth more challenging,” said Saunders in a research note. (Photo: Lululemon/ Facebook)

VANCOUVER –Lululemon Athletica Inc.’s stock plunged Wednesday by nearly 20 per cent in after-hours trading as it warned of a sluggish start to retail sales this year and set out its 2017 guidance.

The company renowned for its yoga wear said its online sales had seen the biggest drop this year because of a lack of selection, while store traffic had also seen a dip.

“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,” said CEO Laurent Potdevin in a statement.

For the first quarter, the company expects net revenue to come in at a range of between US$510 million and US$515 million, with diluted earnings per share in the range of $0.25 and US$0.27, as it expects a low single digit sales decrease.

The projection was below the US$552.4 million analysts were expecting based on a consensus compiled by Thomson Reuters.

For the full year ahead, the company is forecasting net revenue of about US$2.6 billion, for diluted earnings per share of between US$2.26 and US$2.36.

Neil Saunders, managing director of GlobalData Retail, said Lululemon had a strong showing last year but he sees a mixed outlook in the year ahead as competition in the athletic wear industry heats up.

“Lululemon is now coming up against tougher comparatives which will make growth more challenging,” said Saunders in a research note. “Moreover, it will have to contend with the saturation of a slowing athleisure market.”

Markets reacted to the news negatively, sending the share price down US$12.05 or about 18.2 per cent to US$54.25 on the Nasdaq in after-hours trading.

Revenue and net income for the quarter ending Jan. 29 were slightly off analyst estimate

Lululemon reported net income for the quarter of US$136.1 million, down from a consensus of US$138.7 million. Revenue was US$789.9 million compared with estimates of US$783.6 million.

Net income in the fourth quarter was up from US$117.4 million, or about 16 per cent, in the same quarter a year earlier as total comparable sales ticked up eight per cent, the company said.