Lululemon Athletica Q2 Profit Falls, Yet Tops Estimates; Lifts Full-year Outlook

(RTTNews) - Canadian yoga-wear maker Lululemon Athletica, Inc. (LULU) Thursday reported a fall in the second-quarter profit, reflecting higher costs and expenses. Net revenues, however, grew 13 percent from last year. Earnings per share, as well as revenues topped analysts expectations.

The company issued guidance for the third quarter, and slightly raised its outlook for the full year. The shares rose more than 12 percent in pre-market trading.

For the second quarter ended August 3, the Vancouver, Canada-based company posted net income of $48.75 million or $0.33 per share, down from $56.47 million or $0.39 per share in the previous year.

On average, 34 analysts polled by Thomson Reuters expected the company to report profit per share of $0.29 for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter grew 13 percent to $390.71 million from $344.51 million in the same quarter last year. Analysts expected revenue of $376.80 million.

Comparable store sales fell 5 percent on a constant dollar basis. Total comparable sales, including comparable store sales and direct to consumer, remained flat on a constant dollar basis.

Direct to consumer revenue increased to $63.5 million or 16.2 percent of total company revenues, up from 14.3 percent of total company revenues in the preceding year. Direct to consumer revenue climbed 30 percent on constant currency.

Selling, general and administrative expenses increased to $129.42 million from $106.97 million last year.

Looking forward, for third quarter, the company expects earnings per share to be in the range of $0.36 to $0.38, on revenues of $420 million to $425 million, based on a total comparable sales increase in the low single digits on a constant-dollar basis.

Analysts estimate earnings per share of $0.38, on revenues of $421.85 million.

For the fiscal 2014, the group now forecasts earnings per share in the range of $1.51 to $1.56 or normalized earnings per share of $1.72 to $1.77 to reflect non-recurring tax adjustment incurred in the first quarter of fiscal 2014.

This compares with prior guidance for earnings per share of $1.50 to $1.55 or normalized earnings per share of $1.71 to $1.76.

Revenues are projected to be between $1.78 billion and $1.80 billion, based on a total comparable sales increase in the low single digits on a constant-dollar basis. The company's earlier guidance was for revenues of between $1.77 billion and $1.80 billion.

Analysts estimate earnings per share of $1.74, on revenues of $1.78 billion for the year.

During the quarter, the company opened 8 stores, and as at the end of the quarter, it had 270 stores.

Earlier last month, Lululemon said its founder Dennis 'Chip' Wilson agreed to sell about half of his 27.7 percent stake in the company to private equity firm Advent International for about $845 million and also agreed not to launch a proxy fight or a hostile takeover of the company.

Wilson, who founded Lululemon in 1998, was said to be looking to shake up the company's board and gain more influence over its operations.

Lululemon made headlines last year when customers complained that some of their black yoga pants being too sheer. The recall of these products cost the company millions of dollars and dented its image.

LULU closed Wednesday's regular trading at $38.39, down 0.75 percent.In the pre-market activity on Thursday, the shares rose 12.14 percent.