Lululemon Falls On Adjusted Earnings Miss, Downbeat Forecast

Lululemon Athletica inc. LULU fell more than 3 percent for failing to deliver expected adjusted earnings for the first quarter. Revenue came in above the expected level. The company's earnings forecast for the second quarter also fell short of the expectations.

Lululemon reported net income of $45.34 million in the first quarter, down from $47.81 million while earnings slipped to $0.33 a share from $0.34 a share in the year-ago quarter. Excluding adjustments, it would have earned only $0.31 a share thus missing the Street analysts' expectations by a penny.

The company's net revenue grew 17 percent to $495.5 million from $423.5 million in the previous year quarter. On a constant currency basis, the top line would have increased by 19 percent. The company's comparable sales advanced 6 percent or 8 percent on a constant currency basis. Street analysts' predicted revenue of $487.67 million.

Lululemon's CEO, Laurent Potdevin, commented, "We are pleased with our first quarter performance, delivering strong sales results and gross margin that exceeded expectations. We finished the quarter with our inventory levels rebalanced and on track to achieve our goals for the year."

Potdevin added, "I'm extremely proud of our teams who have relentlessly built the capabilities and infrastructure necessary to support profitable growth. By continuing to invest in our people and focus on product innovation, we are well on our way to deliver on our five year plan."

The Company closed the first quarter with $550.0 million in cash and cash equivalents, down from $655.9 million in the comparable period. Inventories increased 21% to $286.2 million from $236.5 million in the preceding year quarter.

Moving ahead, Lululemon expects net revenue of $505-$515 million based on total comparable sales in the mid-single digits on a constant dollar basis for the second quarter. The company also expects earnings per share to be $0.36 to $0.38 for the same period. Street estimate earnings of $0.39 a share and revenue of $513.9 million.

For the full fiscal 2016, the company indicated that it expects earnings to be $2.08-$2.18 on revenues of $2.305-$2.345 billion. Analysts predict the company to deliver earnings of $2.16 a share and revenue of $2.34 billion.

The stock recently traded down 1.6 percent at $66.99 in the pre-market on Wednesday.