Lululemon’s shares drop after weak outlook

NEW YORK — Shares of Lululemon Athletica Inc. fell more than 17 per cent Wednesday after the athletic-inspired sportswear company said it’d had a slow start to the year and offered a weaker outlook than expected for the current quarter.

The company known for its yoga gear did report solid growth in both earnings and revenue for its fiscal fourth quarter.

CEO Laurent Potdevin, who took the helm in 2014, said that 2016 marked a milestone year where the company returned to positive operating income growth for the first time in three years. But he acknowledged that Lululemon had issues in the early part of this year with the assortment of merchandise it offered shoppers and with visual merchandising. Potdevin promised that people will see more colour as early as next week.

Lululemon has generally benefited from the shift in athletic wear becoming everyday fashion. But it’s also faced stiffer competition from brands like Victoria’s Secret, Gap and H&M.

Potdevin has said he wants to double sales to $4 billion by 2020, push innovation in products like swimwear and menswear, add more stores in North America and catch up in e-commerce. Lululemon has nearly 400 stores globally in the U.S., Europe, Asia, Australia and elsewhere.

The CEO also has been rebuilding after a major product hitch in 2013 that cost the company millions and sent the stock tumbling. Lululemon recalled thousands of its stretchy black yoga pants after customer complaints that they were too sheer.

Since then, the company relaunched its website and improved its inventory search to let shoppers check in its app whether items are in stock at a particular store. Lululemon has also revamped its store wall of yoga pants with new fabrics.

Lululemon said late Wednesday it earned $136.1 million, or 99 cents per share, for the three months that ended Jan. 29. That compares with $117.4 million, or 85 cents per share, a year earlier. Revenue came to $789.9 million, up from $704.3 million a year earlier. Analysts expected earnings of $1.01 per share on revenue of $783 million, according to FactSet analysts.

But Lululemon disappointed investors by saying it expects net revenue of $510 million to $515 million for the current quarter. Analysts had projected $553 million, according to FactSet. The company also forecast earnings per share of 25 cents to 27 cents for the first quarter. Analysts had expected 39 cents per share, according to FactSet.

Shares were down $11.56 to $54.73 in after-hours after rising 4 per cent to close at $66.30.

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