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Lululemon shares fell 15 per cent Monday, 4th quarter revenue down
Lululemon's shares tumbled 15 per cent on Monday, and some are wondering whether the yoga wear maker has hit its peak... for good.
"Lululemon enjoyed several years of extremely strong growth," said John Zolidis, analyst at Buckingham Research. "Those days are now behind the company."
(Zollidis's remarks were from a "note to clients" according to BusinessInsider.com)
At close of Monday's market, shares were reportedly down 17 per cent to $49.70, the company's lowest value since June 11, 2013.
In a news release on Jan. 13, Lululemon said it had revised its revenue from the fourth quarter of 2013 to $513-$518 million, a fall from its previous estimate of $535-$540 million. "Diluted earnings per share" were also revised to $0.71-$0.73 for the fourth quarter, as well.
"... Since the beginning of January, we have seen traffic and sales trends decelerate meaningfully," said Lululemon CFO John Currie, in the statement. "Based on this recent performance and assuming these trends continue through the remainder of January, we are reducing our outlook for the fourth quarter."
"As we end 2013, we are starting to see the results of the significant investments we made throughout this past year to strengthen and enhance our back-of-house product operations structure. While we realize that it will require continued investment and time to get to best-in-class status, with our new leadership in place we are very focused on building on this stronger foundation to execute our long-term growth strategies."
Lululemon's fourth quarter ends on Feb. 2, 2014.
In the past year, the company was battled a sequence of PR fumbles, from offending comments about women by its founder, Wilson, to problems and recalls with its products and pants, specifically that they were 'see-through' and/or 'pilling'.
In an interview with the Globe and Mail's Marina Strauss, Lululemon's CFO – Currie – addressed the problems of 2013, and the company is planning a "major expansion" overseas.
"What doesn't kill you makes you stronger," Currie said. "I'm joking, but not really."
"Our brand team is huddled right now, working pretty hard on coming up with ideas for everything we can do to get the conversation back to the fact that Lululemon has the best quality."
In March, 2013, in the middle of the yogawear company's 'see-through' controversy, Zollidis (the analyst from above) addressed the news that Lululemon's growth had slowed to 10 per cent from 26 per cent a year earlier.
On the same day – March 21, 2013 – an equity firm called The Oxen Group, called the company's stock "strongly overvalued".
"LULU is a company that is working against rising competition from other high-quality fitness clothing brands and we do not see any concrete plans for the 2013 fiscal year that counteract this," the Group wrote in a contributed article for SeekingAlpha.com.
"Although LULU should maintain increases in profits we believe that the company will devalue over 20% in 2013 to become more fair valued, so we maintain this stock at Sell.
"All in all we see LULU as a company that is over valued and left vulnerable for the coming fiscal year."