Canadian yogawear retailer Lululemon Athletica forecast earnings and revenue below analysts' expectations, saying it would spend more on innovation to drive sustainable growth.
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The company's shares slid in premarket trading on Thursday as investors shrugged off the stronger-than-expected results for the fourth quarter ended on Feb. 1.
Shares of Lululemon, which warned in January that margins would trough in 2015, fell more than 7 percent in early trading but partly rebounded to trade down 2.4 percent at $59.50 at 0830 EDT (1230 GMT).
"At first glance, guidance appears conservative," SunTrust analyst Pamela Quintiliano said in a note. "We look forward to hearing more information on the call regarding current trends to ascertain if this is indicative of a stall in the turn, or a cautious approach."
The Vancouver-based company forecast earnings of 31 cents to 33 cents a share for the current quarter. Analysts on average were expecting 39 cents a share, according to Thomson Reuters I/B/E/S.
Lululemon said it expected revenue of $413 million to $418 million for the quarter, below the analysts' average estimate of $442 million.
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The company also forecast fiscal-year earnings of $1.85 to $1.90 a share on revenue of $1.97 billion to $2.02 billion. Analysts had expected a profit of $2.06 a share on sales of $2.05 billion.
Lululemon said it expected its total comparable sales, which include same-store and online sales, to increase at a low single-digit percentage rate in the first quarter and in the mid single-digits for the full year.
The company said its fourth-quarter profit rose to $110.9 million, or 78 cents a share, from $109.7 million, or 75 cents a share, a year earlier. Analysts had expected 73 cents a share.
Comparable sales increased 8 percent, while net revenue jumped 16 percent to $602.5 million, edging past Wall Street's forecasts of $602.4 million.
"Our solid performance in the fourth quarter builds on the momentum that began in the third quarter and reflects improved traffic and a strong guest response," Chief Executive Laurent Potdevin said in a statement.
Lululemon shares have declined about 10 percent since the beginning of March. They had rallied in previous months on signs that the company was getting back on track after a high-profile yoga pants recall led to executive changes and a supply chain overhaul. (Reporting by Euan Rocha and Solarina Ho in Toronto and Sayantani Ghosh in Bangalore; Editing by Maju Samuel, W Simon and Lisa Von Ahn)