Lululemon confirms sales growth to slow; shares slide

Mon Jan 14, 2013 6:41pm EST
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(Reuters) - Lululemon Athletica Inc LLL.TO said on Monday it expected growth slowed sharply at its established yoga-wear shops for the quarter that includes the crucial holiday shopping season, driving its shares down 6 percent.

The Canadian-based purveyor of pricey women's workout gear said it sees same-store sales growth "in the high-single digits" for the fiscal fourth quarter ending February 3, down sharply from growth of 26 percent in the comparable quarter last year. Lululemon announced its outlook after the close of the stock market.

While the outlook is identical to the company's forecast when it reported third-quarter earnings on December 6, the update came as a surprise to the market. Lululemon tends to be conservative in its outlook, and many expected the retailer to outperform its initial forecast.

Lululemon's stock, which trades at a steep price-earnings multiple, reflects "crazy expectations," said Brian Sozzi, chief equities analyst at NBG Productions.

"It's at the point now where even if they were to come out and announce a blowout holiday quarter, the stock probably would have sold off - but they actually gave you more reason here," he said.

Lululemon's typically volatile Nasdaq-listed stock dropped 6.1 percent to $67.85 after the bell.

Credit Suisse analyst Christian Buss said that with the highest store productivity of any U.S. apparel retailer, Lululemon may be struggling to grow sales in mature markets.

That doesn't mean there is no room for growth, however, said Buss, who had downgraded his rating on the stock to "neutral" from "outperform" in early January, citing slowing growth at established stores in Canada.

"This is still a company executing very, very well, that has a significant runway to expand the store footprint," he said.   Continued...