Lululemon Athletica Inc.'s issues are far from over.
Shares of the yogawear retailer slumped 15.9 percent in over-the-counter trading Thursday after the company said first-quarter profits fell 59.9 percent and lowered guidance for the year.
Laurent Potdevin, chief executive officer, noted three key priorities to turn the company around — build the product engine to consistently push new offerings in men’s and women’s, implement a new branding and communications strategy and international growth. Investors didn’t seem impressed, at least concerning Lululemon’s short-term fortunes.
That’s in part because Potdevin also said, “We knew heading into 2014 that driving sales in the first half of the year would be impacted by the suboptimal product assortment combined with the traffic trend. [Second-quarter] sales have started off behind plan and comps are more impacted than we had originally anticipated.”
He noted that while there’s been progress on the product development front and the redesign of the retailer’s go-to-market calendar that will start to reap benefits in the second quarter of 2015, it won’t be until the first quarter of 2016 that the company will have a “fully operational world-class product engine to support a global omnichannel multibrand business with localized assortment capability.”
Nearly 36.4 million shares changed hands, compared with a three-month average volume of 3.1 million, as the stock on Thursday closed at $37.25.
For the three months ended May 4, net income was $19 million, or 13 cents a diluted share, from $47.3 million, or 32 cents, in the year-ago quarter. The drop was mostly due to a tax expense related to planned repatriation of foreign earnings that will be used to fund the company’s $450 million share buyback program. Net revenue rose 11.2 percent to $384.6 million from $345.8 million.
The company, which said its board has approved the share buyback program, also lowered guidance for the second quarter and full year.
For the second quarter, the firm expects net revenue of between $375 million and $380 million, and diluted earnings per share of 28 cents to 30 cents.
For full fiscal year 2014, net revenue is forecasted in the range of $1.77 billion to $1.80 billion, with diluted EPS between $1.50 and $1.55.
Potdevin spoke during a conference call with Wall Street analysts about Lululemon implementing a social platform that would allow it to “leverage the power of our investor community,” as well as an in-store technology rollout to enable shoppers to buy from the larger online inventory that’s more encompassing than what’s in the stores. While he spoke about how the digital project allows the company to target new “guests” and drive additional sales, he didn’t elaborate on what would be new to the social platform. Executives on the call said it will go live in September to “gather up real-time, all of the work that’s happening in our communities and sort of be able to share that in a much more efficient way.”
Separately, the company said chief financial officer John Currie intends to retire by the end of the fiscal year.
Analysts remained cautious about Lululemon’s near-term prospects. Jefferies’ Randal J. Konik said, “Bottom line, the picture here doesn’t seem to be getting much better as other retailers show signs of improvement and we believe competition is becoming a more pressing issue. Traffic has picked up somewhat, but conversions down is a cause for concern, as we believe this highlights fundamental flaws in the core [business].”
Wells Fargo’s Paul Lejuez said that while “we believe recent product issues will not affect long-term demand or customer loyalty, quality control infrastructure investments may take longer than anticipated and drag on returns.”
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews