Lululemon Athletica Inc. shares dropped the most in seven months after the yogawear retailer cut its revenue and earnings forecast.
Lululemon fell 17 percent to $49.70 at the close in New York for the largest decline since June 11. For the fourth quarter ending Feb. 2, Vancouver-based Lululemon now anticipates revenue of as much as $518 million, down from a maximum of $540 million, the retailer said in a statement today. Earnings will be 71 cents to 73 cents a share, compared with a previous forecast of 78 cents to 80 cents, according to the statement. Analysts estimated revenue of $541 million and earnings of 79 cents a share.
Retailers from Victoria’s Secret owner L Brands Inc. to discounter Family Dollar Stores Inc. have cut forecasts this month in the wake of a margin-eating price war this holiday season. Lululemon has also been trying to win back customers after being forced to recall pants last year for being too sheer and has struggled to overcome supply-chain delays as it expands overseas and fends off growing competition. The yogawear maker named a new chief executive officer last month.
“Lululemon enjoyed several years of extremely strong growth,” John Zolidis, a New York-based analyst at Buckingham Research, wrote in a note to clients today. “Those days are now behind the company.”
Zolidis has the equivalent of a sell rating on the shares and urged clients to reduce holdings “aggressively.”
U.S. retail sales rose 2.7 percent in November and December, the smallest increase since 2009, according to ShopperTrak, a Chicago-based researcher. Customer traffic in November and December declined 15 percent from the same period a year earlier, ShopperTrak said.
Lululemon said sales at stores open at least a year will see negative growth or rise in the low-to-mid single digits in the fourth quarter compared with a year earlier. This would be the first quarterly decline in so-called same-store sales since the second quarter of 2009, Howard Tubin, a New York-based analyst at RBC Capital Markets, wrote in a note to clients today.
“Since the beginning of January, we have seen traffic and sales trends decelerate meaningfully,” Chief Financial Officer John Currie said in the statement today.