Lululemon Athletica Q1 Profit Falls, Sees Q2 Below View; Cuts FY Outlook

(RTTNews) - Canadian yoga-wear maker Lululemon Athletica, Inc. (LULU) Thursday said its first-quarter profit more than halved from last year, reflecting higher tax provision. Revenues, however, climbed 11 percent. Adjusted earnings, as well as revenues beat analysts' expectations.

The company provided second-quarter earnings and revenue guidance below estimates, and lowered its outlook for the fiscal year. The shares fell about 12 percent in pre-market trading.

The Vancouver, Canada-based company also announced $450 million stock repurchase plan, and said its Chief Financial Officer John Currie plans to retire by the end of fiscal year.

For the first quarter ended May 4, the firm posted net income of $18.98 million or $0.13 per share, down from $47.28 million or $0.32 per share in the previous year.

Income before provision for income taxes was $71.44 million, compared to $67.39 million last year. Excluding one-time adjustment of a $0.21 per share impact from planned repatriation of foreign earnings, earnings per share were $0.34 in the first quarter of fiscal 2014.

On average, 33 analysts polled by Thomson Reuters expected the company to report profit per share of $0.32 for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter grew 11 percent to $384.62 million from $345.78 million reported a year ago. Analysts expected revenue of $381.24 million for the quarter.

Total comparable sales on a combined basis edged up 1 percent on a constant dollar basis, while the increase was 12 percent last year.

Direct to consumer revenue increased to $66 million, which represented 17.2 percent of total company revenues. This shows an increase from 15.6 percent of total company revenues in the first quarter of fiscal 2013.

Provision for income taxes totaled $52.46 million, up from $20.11 million in the preceding year. Recent-quarter tax expense included a one-time adjustment of $30.9 million for planned repatriation of foreign earnings that will be used to fund the share buyback program, the firm said.

Looking ahead to the second quarter, the company expects earnings per share to be in the range of $0.28 to $0.30. Net revenues are anticipated to be between $375 million and $380 million, based on a total combined comparable sales decrease in the low to mid single digits on a constant-dollar basis.

Analysts expect the company to report second-quarter earnings of $0.36 per share, on revenue of $387.19 million.

For fiscal 2014, the company now expects earnings per share to be in the range of $1.50 to $1.55, or $1.71 to $1.76 normalized for the one-time tax adjustment related to the planned repatriation.

Net revenues are expected to be between $1.77 billion and $1.80 billion, based on a total combined comparable sales increase in the low single digits on a constant-dollar basis.

Earlier, the company forecast earnings of $1.80 to $1.90 per share, on revenues of $1.77 billion to $1.82 billion for the fiscal year, based on a total combined comparable sales increase in the low to mid-single digits on a constant dollar basis.

Analysts are currently looking for earnings of $1.89 per share, on revenue of $1.80 billion for the fiscal.

The company noted that its guidance does not reflect the potential repurchase of shares.

Laurent Potdevin, CEO of the company said, "We are pleased that Q1 results were slightly ahead of our expectations...Despite a reduced outlook, I am confident that the work we are doing today will only enhance our premium positioning as we continue to lead as the market innovator."

LULU closed Wednesday's regular trading at $44.30, down 2.59 percent. In the pre-market activity on Thursday, the shares fell 11.96 percent.