Lululemon Athletica Looks Fit on Earnings, Out-of-Shape on Guidance

Lululemon Athletica LULU is up on Thursday after posting successful earnings for both the fourth quarter and 2012. The Vancouver, British Columbia-based firm posted fourth quarter EPS of $0.75, up 47 percent year-over-year. It also edged the Wall Street consensus of $0.74. Fourth quarter revenue finished up over 30 percent at $485.5 million, narrowly surpassing the $482.1 million analysts expected. Full-year EPS climbed 46 percent to close at $1.85, topping analysts' hopes of $1.84. Total 2012 revenue closed up 40 percent at $1.4 billion, beating estimates of $1.37 billion. Comparable Store Sales Shape Up Well Lululemon's comparable stores sales grew 10 percent during the fourth quarter. For the year, this figure rose 16 percent. Direct-to-Consumer Revenue Gains Mass Direct-to-consumer (DTC) revenue climbed 56 percent during the fourth quarter and closed at over $78 million. As a percentage of net revenue, this figure grew from 13.5 to 16.1 percent year-over-year. The Canadian athletic apparel firm's DTC revenue increased 86 percent for the full year and finished at over $197 million. It grew from 10.6 percent of net revenue in 2011 to 14.4 percent in 2012. Bulked Up Store Count Lululemon netted 37 new stores in 2012. The company now operates 211 stores in Australia and North America. Black Luon Products Unfit On Monday, Lululemon announced an expected shortage in its supply of black Luon pants and crops. The company cited that certain women's bottoms did not meet its technical specifications, resulting in a “level of sheerness” that fell short of its standards. Lululemon pulled the affected items from its e-commerce site, showrooms and stores over the past weekend. Notably, the pulled items represented approximately 17 percent of all women's bottoms in the company's stores. As a result, Lululemon anticipates a near-term shortage of the affected styles. Investors may wish to monitor the financial fallout of this development closely during the first quarter. Sour Guidance Lululemon anticipates first quarter earnings of $0.28 to $0.30 per share. If this pans out, it will fall far short of the $0.40 analysts expect. The company expects first quarter revenue to close in the $333 to $343 million range, which would be below the $345 million analysts want to see. Full-year earnings are expected to finish in the $1.95 to $1.99 range, which would be significantly below the Wall Street consensus of $2.17. Total 2013 revenue is expected to round out in the $1.615 to $1.64 billion range - a bit below the $1.67 billion analysts want to see. Running Forward on Wall Street Lululemon's positive earnings have outweighed its negative guidance thus far on Wall Street. After eclipsing $70 on March 14, the stock declined around 9.5 percent through Wednesday. However, it appears to be headed in the right direction again in the pre-market. Lululemon is up approximately one percent on Thursday.