Lululemon Falls as Pants Deemed Too Transparent
Lululemon Athletica Inc. (LULU), the yoga- wear retailer that blends fashion and lifestyle marketing, declined after it was forced to withdraw women’s pants that proved to be too transparent.
Fiscal first-quarter revenue will be lower than forecast because of the shortage, Vancouver-based Lululemon said in a statement yesterday.
Lululemon fell 2.8 percent to $64.08 at the close in New York. The shares dropped 16 percent this year, while the Standard & Poor’s 500 Index has gained 8.6 percent.
Certain shipments of black Luon pants were too transparent and didn’t meet the company’s standards, Lululemon said. The affected items, which were made available March 1 before being pulled, account for about 17 percent of all women’s pants in stores, the company said. The error follows dye issues and supply-chain problems in recent quarters, said Edward Yruma, an analyst at Keybanc Capital Markets in New York.
“We expect this most recent issue to further heighten the scrutiny on the supply chain, which could distract from the near-term seeding of international markets,” Yruma wrote in a note today. He recommends buying the shares.
Lululemon’s Luon Straight to the Studio pants sell for $98 on the retailer’s website.
Revenue in the current quarter will be as much as $343 million, down from a previous estimate of as much as $355 million, Lululemon said. Comparable-store sales will increase as much as 8 percent, compared with a previous forecast of 11 percent. Lululemon’s revenue has expanded by at least 30 percent for 13 quarters, according to data compiled by Bloomberg.
“We expect this issue will have a significant impact on our financial results,” the company said in the statement. “We have used the same manufacturing partner on key fabrics since 2004. This event is not the result of changing manufacturers or quality of ingredients.”
Lululemon said it will offer full refunds or exchanges to customers who bought the black Luon pants after March 1 either online or in stores.
The yoga-wear maker is scheduled to report earnings for its fiscal fourth quarter, which ended Feb. 3, on March 21.
Lululemon, which has more than 200 locations, in January forecast sales for the final quarter of its year that trailed analysts’ estimates, signaling a possible slowdown. Lululemon has reported sales growth of at least 30 percent for the past 13 quarters, according to data compiled by Bloomberg.
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