Lululemon shares plunged 20% after the retailer posted another quarter of disappointing results and cut its full-year revenue and earnings guidance. Interim CEO Meghan Frank pointed to negative social media commentary and a greater-than-expected slowdown in core categories like leggings. Incoming CEO Heidi O'Neill takes over next week as the company tries to reverse the decline.
Shares of Lululemon plunged 20% in premarket trading Friday after the retailer reported another quarter of disappointing results and cut its outlook for the year. The sportswear maker's stock tumbled 20% after issuing a glum forecast for the current quarter.
Comparable sales sink 9%
The company posted a 4% decline in revenue and a comparable sales decrease of 9% for the second fiscal quarter. It was only the latest rough quarter for the apparel retailer, after it reduced guidance the previous quarter. Adjusted earnings came in at $2.06 per share on revenue of $2.42 billion, short of the $1.79 per share and $2.46 billion Wall Street expected. Net income fell to $329.2 million, or $2.92 per share, from $370.9 million, or $3.10 per share, a year earlier.
Guidance falls further behind Wall Street
For the third fiscal quarter, Lululemon expects revenue between $2.29 billion and $2.32 billion, a decline of roughly 10% to 11% from a year ago, with earnings of 93 cents to 98 cents per share. Analysts had been looking for $2.40 per share on $2.53 billion in revenue for that period. For the full year, the retailer now expects net revenue of $10.35 billion to $10.5 billion, a decline of 5% to 7%, down from its prior guidance of $11 billion to $11.15 billion. It anticipates earnings between $9.48 and $9.73 per share, compared with previous guidance of $10.95 to $11.15, a figure that includes a boost from tariff refunds.
Interim CEO points to social media backlash
Interim CEO Meghan Frank told analysts the company experienced negative commentary on social media that affected its performance in the quarter, along with a greater-than-expected slowdown in core categories, including leggings. She said gross profit decreased 1% to $1.5 billion, while gross margin grew 5.6%, boosted by a $134.5 million tariff refund. According to CNBC, Frank said: "We know there is much more work to be done"
Incoming CEO Heidi O'Neill takes the reins of the stock market-listed retailer next week, as it looks to reverse the slide in revenue and guidance.
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