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Lululemon cuts 4Q outlook on weak January sales

January 13, 2014

NEW YORK (AP) — Lululemon Athletica Inc. is lowering its fiscal fourth-quarter forecasts below analysts’ estimates due to declining traffic and sales in January.

The yoga-inspired clothing company’s stock dropped almost 17 percent in trading Monday morning.

Lululemon now foresees quarterly earnings between 71 cents and 73 cents per share on revenue in a range of $513 million to $518 million. Its prior guidance was for earnings of 78 cents to 80 cents per share on revenue of $535 million to $540 million.

Analysts polled by FactSet predict earnings of 79 cents per share on revenue of $541.2 million for the period ending Feb. 2.

Lululemon also anticipates sales at stores open at least a year to decline by a low- to mid- single digit percentage rate. The company’s previous outlook was for the metric to be flat on a constant-dollar basis.

This figure is a key gauge of a retailer’s health because it excludes results from stores recently opened or closed.

Chief Financial Officer John Currie said in a statement that since the start of January Lululemon’s sales and traffic slowed “meaningfully.” He said the company was lowering its quarterly guidance based on the recent performance and the assumption that the slowdown would continue through the rest of the month.

Lululemon is trying to bounce back from a series of embarrassing issues. In the spring it pulled a line of its popular yoga pants from shelves after customers complained they were too sheer, which it blamed on production problems.

Then the Canadian company’s founder, Chip Wilson, angered some people with his comments during a television interview that suggested larger women’s bodies were to blame for some quality complaints. He said some women’s bodies “just don’t actually work” for the company’s pants and said thigh rubbing over time would cause pants to wear out too quickly. Last month Lululemon said that Wilson would step down as chairman. It also named a new CEO, Laurent Potdevin, former head of Toms Shoes. He replaces the company’s popular CEO Christine Day.

Lululemon is expected to report final fourth-quarter financial results on March 27.

Its stock fell $9.80, or 16.4 percent, to $49.80 in morning trading Monday after falling as low as $49 earlier.

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