Lululemon Q4 Results Top Estimates, But Provides Weak Outlook

(RTTNews) - Canadian yogawear maker Lululemon Athletica, Inc. (LULU) reported Thursday a profit for the fourth quarter that edged up from last year, with earnings per share remaining flat and revenues growing seven percent. Both earnings per share and quarterly revenues topped analysts' expectations.

However, the company's shares are trading down three percent in pre-market activity after the company provided earnings guidance for the first quarter and full-year 2014, both below Street view. Yoga clothing remains in style, but cheaper competition may eat away at Lululemon's market.

The company also named Laurent Potdevin in December as the new CEO to succeed Christine Day, who has served as the company's CEO since 2008. Christine Day announced in June that she plans to resign.

"In my first days as CEO, I have been inspired by the people at lululemon, and the passion that lies behind our product and our brand," Potdevin said in a statement.

The Vancouver, Canada-based company posted net income of $109.69 million for the fourth quarter, edging up from $109.38 million in the prior-year quarter, while earnings per share remained flat with last year at $0.75 per share.

On average, 33 analysts polled by Thomson Reuters expected the company to report earnings of $0.72 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter grew 7 percent to $521.99 million from $485.49 million in the same quarter last year, and topped thirty-one Wall Street analysts' consensus estimate of $515.11 million.

On a 13-week basis, comparable-store sales for the quarter declined 5 percent or 2 percent on a constant dollar basis, compared to 11 percent or 10 percent on a constant dollar, in the prior-year quarter.

Total comparable sales, including comparable stores and direct to consumer, increased 2 percent or 4 percent on a constant dollar basis.

However, operating margins for the quarter contracted 180 basis points to 29.6 percent, reflecting a 300 basis points decline in gross margin, partially offset by a 120 basis points decline in selling, general and administrative expenses as a percentage of revenues.

Looking ahead to the first quarter, Lululemon projects earnings in a range of $0.31 to $0.33 per share, on anticipated quarterly revenues between $377 million and $382 million, based on flat total combined comparable sales on a constant dollar basis.

Analysts expect the company to report earnings of $0.38 per share for the first quarter, on revenues of $389.39 million.

For fiscal 2014, the company currently anticipates earnings in the range of $1.80 to $1.90 per share, on projected annual revenues between $1.77 billion and $1.82 billion, based on a total combined comparable sales increase in the low to mid-single digits on a constant dollar basis.

Street is currently looking for full-year 2014 earnings of $2.14 per share, on annual revenues of $1.82 billion.

"As we move into 2014, we are reflecting on our learnings with humility, and are entirely focused on our future. 2014 is an investment year with an emphasis on strengthening our foundation, reigniting our product engine, and accelerating sustainable and controlled global expansion," Potdevin added.

LULU closed Wednesday's regular trading session at $48.23, down $0.26 on a volume of 4.76 million shares.