Lululemon Athletica[3] Inc.'s quarterly profit edged down 1.3% as the maker of high-end yoga gear grappled with higher input costs, outweighing a solid jump in revenue.
Shares dropped 11% in recent premarket trading as Lululemon cut its view for the year and offered a weak third-quarter view.
The earnings report comes as Lululemon is searching for a new chief executive, after CEO Christine Day said in June she would step down as soon as a successor is named. The move by Ms. Day—who has run the company since 2008—came three months after Lululemon was forced to make an expensive and embarrassing recall of its top-selling yoga pants due to a sheerness problem. Lululemon's disclosure about the black luon pants—one of its core items—followed a string of complaints last year that the colors were bleeding on some of its tops.
For the quarter ended Aug. 4, the Vancouver-based company reported a profit of $56.5 million compared with a year-earlier profit of $57.2 million. Per-share earnings were flat at 39 cents a share as the number of shares outstanding climbed slightly.
Revenue jumped 22% to $344.5 million.
Lululemon had expected per-share earnings of 33 cents to 35 cents on revenue between $340 million and $345 million.
Same-store sales were up 8% on a constant-dollar basis.
Inventory at the end of quarter totaled $163 million, compared with $125.4 million a year earlier.
Gross margin narrowed to 54% from 55.1% as input costs rose 25%. Analysts at Barclays had said they expected gross margin to fall due to lower sales volumes related to the luon shortage, pressure on merchandise margin due to mix, and a foreign exchange impact from a weaker Canadian dollar.
For the year, Lululemon now expects per-share earnings of $1.94 to $1.97 on revenue of $1.63 billion to $1.64 billion. Its prior view was for $1.96 to $2.01 a share and about $1.65 billion to $1.67 billion, respectively.
For the third quarter, Lululemon is expecting per-share earnings of 39 cents to 41 cents on revenue of $370 million to $375 million. Analysts polled by Thomson Reuters recently expected 44 cents on $389 million respectively.
Lululemon also said Thursday that it reached a deal to be the exclusive user of X-STATIC antimicrobial technology from Noble Biomaterials. The technology has been used in Lululemon's Silverescent fabric since 2005, with the company saying the deal secures its "leadership position in 'anti-stink' athletic apparel."
References
- ^ SAABIRA CHAUDHURI (topics.wsj.com)
- ^ CONNECT (online.wsj.com)
- ^ Lululemon Athletica (online.wsj.com)
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