Lululemon shares plunge 16%
Lululemon Athletica Inc. shares plunged to their lowest level in more than three years after the apparel maker reported lackluster quarterly results and cut its financial forecast amid a public feud between founder Chip Wilson and the company’s board.
The stock fell $7.05, or 15.9%, on Thursday to $37.25.
Early in the day, Lululemon posted earnings of $19 million, or 13 cents a share, for its fiscal quarter ended May 4, compared with $47.3 million, or 32 cents, for the year-earlier quarter. Revenue rose 11% to $384.6 million, but same-store sales increased just 1%.
The company also reported a tax-related drop in first-quarter earnings stemming from a plan to buy back up to $450 million in shares.
The Vancouver company, still reeling from last year’s recall of yoga pants, also lowered both its forecast for the full year. It now expects a profit of $1.71 to $1.76 a share, down from an earlier projection of $1.80 to $1.90, and revenue that would be $20 million to $50 million off its prior estimate of $1.82 billion.
The yoga-wear maker also announced that John Currie will resign at the end of the fiscal year as chief financial officer.
Laurent Potdevin, who was named chief executive in December, tried to reassure investors that 2014 is a transition year following Lululemon’s string of headline-grabbing problems.
“Despite a reduced outlook, I am confident that the work we are doing today will only enhance our premium positioning,” he said.
Once a top player in athletic wear, Lululemon is grappling with the fallout from last year’s recall of 17% of its Luon yoga pants for being nearly transparent.
The crisis was exacerbated when Wilson made comments that seemed to blame the problems on overweight customers whose thighs rubbed together too much. That rankled its strong base of female customers.
The problems eventually resulted in the resignation of Christine Day, its once-popular chief executive.
Lululemon’s results were released a day after Wilson, who owns 27% of the company, said he had voted against the reelection of its chairman, Michael Casey, and another board member.
Wilson issued a statement criticizing the board for being too focused on short-term growth. The company quickly responded, saying board members were “aligned with the company’s core values.”
Internal feuding over the brand’s direction has marred Lululemon’s reputation. Wilson, who resigned as chief executive in 2005 but remained on the board, often has clashed with others, including Casey and Day.
The recall, the bickering, Day’s exit and Wilson’s comments have hurt the company’s performance, analysts said, and have opened the door for competitors Gap Inc., Nike Inc. and Lorna Jane, all of which sell similar designs at lower prices.
Potdevin told investors in March that the company, which helped create a lucrative athletic and yoga-wear market, was “not the only game in town anymore.”
