1 hr ago
Lululemon Shares Plunge After Weak Quarter, Lowered Outlook
Lululemon sells athletic clothing, but its latest sales were weaker than expected.
Revenue fell 4% compared with the same quarter last year.
Sales at comparable stores and channels dropped 9%.
The company said social-media criticism and weaker demand for products such as leggings hurt results.
Lululemon also expects sales to fall more sharply in the current quarter.
It lowered its expectations for both yearly sales and earnings.
A tariff refund helped the company’s gross margin, but gross profit still fell 1%.
Investors reacted by sending the stock down more than 18% after trading officially ended.
Interim CEO Meghan Frank said the company will introduce new styles and manage inventory more carefully, while Heidi O’Neill is set to become CEO next week.
Lululemon reported second-quarter revenue of $2.42 billion, down 4% year over year and below the $2.46 billion analyst estimate.
Comparable sales fell 9%, with interim CEO Meghan Frank citing negative social-media commentary and a slowdown in core categories such as leggings.
The company expects current-quarter revenue to decline 10% to 11% year over year, reaching $2.29 billion to $2.32 billion.
Lululemon cut full-year revenue guidance to $10.35 billion-$10.5 billion and EPS guidance to $9.48-$9.73 per share.
Shares fell 18.2% in extended trading to $99.65, while the stock had already declined 42% this year.
- Who
- Lululemon Athletica Inc., interim CEO Meghan Frank, and incoming CEO Heidi O’Neill.
- What
- Lululemon reported weaker second-quarter results, reduced its financial guidance, and saw its shares fall 18.2% in extended trading.
- Where
- The share decline occurred in Wall Street’s extended trading session.
- When
- Thursday, September 3; Heidi O’Neill is expected to take charge the following week.
- Why
- Investors responded to falling revenue and comparable sales, weaker expectations for the current quarter and full year, and reduced EPS guidance.
Lululemon Management’s Explanation
Investors’ Market Reaction
Reasons for weaker performance
Lululemon Management’s Explanation
Interim CEO Meghan Frank attributed the results to negative social-media commentary and a greater-than-expected slowdown in core categories, including leggings.
Investors’ Market Reaction
The market focused on the 4% revenue decline, 9% comparable-sales drop, and expectations for a further 10% to 11% revenue decline in the current quarter.
Path to recovery
Lululemon Management’s Explanation
Management said it would introduce new styles, tighten inventory, serve customers, and execute initiatives intended to return the business to sales growth.
Investors’ Market Reaction
Investors reacted negatively to the lowered full-year revenue and EPS outlook, sending shares down 18.2% in extended trading.
Key facts
- Second-quarter revenue
- $2.42 billion, down 4% year over year and below the $2.46 billion analyst expectation
- Comparable sales
- Down 9% year over year
- Current-quarter revenue outlook
- $2.29 billion to $2.32 billion, representing a projected 10% to 11% decline
- Full-year revenue outlook
- Reduced to $10.35 billion to $10.5 billion from the prior $11 billion to $11.15 billion range
- Full-year EPS outlook
- Reduced to $9.48 to $9.73 per share from $10.95 to $11.15
- Tariff refund
- A $134.5 million refund helped raise gross margin to 5.6%
- Stock performance
- Shares closed at $99.65 in extended trading after falling 18.2%; the stock was down 42% for the year
Quotes
Meghan Frank
Lululemon’s interim chief executive officer
“We know there is much more work to be done,” “Our management team leaders and employees are focused on serving our guests and executing initiatives to drive an inflection in our business.”
CNBC TV 18
Sources
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