By  on December 11, 2008

Despite higher third-quarter earnings and sales, Lululemon Athletica Inc. revised its full-year guidance downward on Thursday, triggering a 32 percent decline in its share price.

The Vancouver-based yogawear firm lowered its full-year earnings forecast to 55 cents to 57 cents a diluted share from 68 cents to 71 cents. The company’s stock closed at $7.08, down $3.38 in Nasdaq trading.

“Like most retailers, we have experienced decelerating trends beginning in October that continued through November and are expected to persist,” chief executive officer Christine Day said on an earnings call. “Our comps turned negative in November, proving they are not immune to the squeeze on consumer spending and heavy promotional environment today.”

Lululemon blamed the weak Canadian dollar and general economic outlook for its revised guidance. The company said business will be challenging for at least the next six to 12 months.

However, in the third quarter ended Nov. 2, earnings climbed 17 percent to $8.8 million, or 13 cents a diluted share, from $7.6 million, or 11 cents in the year-ago period. Sales increased 34 percent to $87.0 million from $64.9 million.

For the first nine months of the fiscal year, earnings gained 76 percent to $28.4 million, or 40 cents a diluted share, from $16.1 million, or 23 cents, in the same period the previous year. Sales so far this year increased 50 percent to $249.6 million from $166 million.

Lululemon is pulling back on its plan to roll out about 35 new retail stores a year.

“We have five leases signed for stores in fiscal 2009, and we will grow opportunistically only when we see landlords start to reflect the reality of a new world in their leases,” Day said.

Lululemon is resisting the promotional activity, even if it hurts sales in the short run.

“We’ve realized that guests have more options with the heavy promotional environment elsewhere,” Day said. “We plan to react, but in our own unique and entrepreneurial way that is consistent with the value and exclusivity of Lululemon….What you won’t see us do in a promotional strategy is put, you know, 60-percent-off sale tags in our window. That’s really what we’ve tried to stay away from since the beginning of the conception of the brand even through these challenging times.”

Day also made a case for the company’s strengths. She cited Lululemon’s ability to “provide functional and technical product that is seasonless in nature, which helps us to mitigate the inventory issues and fashion risks inherent in most other apparel businesses.”

Lululemon has sought greater flexibility “with our open-to-buy close to Christmas” by delaying purchases for its e-commerce launch, Day said.

“More than 90 percent of the items in our store are at price points below $100,” she said, providing good value for a product that is made to be “worn through multiple seasons and to transition easily from gym to street.”

In addition, she said the company should be helped by the health and wellness trend that has held up during the recession.

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