Lululemon Athletica Inc. (NASDAQ:LULU) falls on “Luon Pants” recall

Posted by Lynn Eisler September 12, 2013 0 Comment 979 views

Vancouver, British Columbia based Premier Yoga and sportswear market leader Lululemon Athletica Inc. (NASDAQ:LULU) reported its second quarter results on Thursday, September 12. In spite of its 2Q results overhauling analysts forecast, Lululemon Athletica Inc. (NASDAQ:LULU) share slid as it emerged that the company will recall of its most sought after “Luon pants” in March which will adversely impact companies new season delivery  schedules through rest of this fiscal year. The company estimates that overall accrued loss due to the Luon recall will be in the range of $40 to $45 million. The recall episode badly bruised Lululemon Athletica Inc. (NASDAQ:LULU)’s implacable brand credentials which stood for durability and chic factor but also accounted for collateral damage in the form of exit of its chief product officer and its long serving Chief executive Christine Day who has decided to move out once her replacement is found.

Tepid 2Q numbers

Lululemon Athletica Inc. (NASDAQ:LULU) shares are trading around $63.73. It’s dropped over 6% from its yesterday’s close price of $69.02 after its 2Q numbers became public.  In 2Q, company recorded a slight dip of 1.2% in its net income compared to 2QFY12. Its net revenue went up by 22% to $344.5 million.

Weak 3Q and full year FY13 Outlook

It also provided a lower guidance for its third quarter of 2013 which will end November’13. It expects net revenue to inch upwards in the 5% to 7% range and has forecasted revenue to come in around $370 to $375 million. LULULEMON ATHLETICA INC. (NASDAQ:LULU) has indicated that diluted earnings per share for 3Q would range between $0.39 and $0.41. It also reworked guidance for fiscal year 2013. It expects its revenue for the year to stabilize around $1.62 to $1.63 billion. These new revenue numbers represent a drop of 1.5% over its previous quarter forecast for the year.

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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