* Sales rise 34 pct to C$87 million
* Blames weak Canadian dollar, economy for outlook cut
* To control expenses, carefully manage inventory
* Stock drops more than 23 percent (Adds stock prices, analyst comment; in U.S. dollars unless noted)
By Susan Taylor
OTTAWA, Dec 11 (Reuters) - Lululemon Athletica Inc LLL.TO (LULU.O) shares tumbled more than 23 percent on Thursday after the trendy clothier's warning of weaker sales and profit for the year overshadowed solid third-quarter results.
Blaming a declining Canadian dollar and ailing retail sector, Lululemon cut its fiscal 2008 earnings forecast to a range of 55 cents to 57 cents a share from a previous forecast of 68 cents to 71 cents.
It also reduced its revenue outlook to $340 million-$345 million from $380 million-$385 million. It still expects to open 35 new stores selling its yoga-inspired workout wear in North America in the year.
"The stock is down as guidance for the year was extremely disappointing," ThinkEquity analyst Suzanne Price said. "I do believe a lot of the lowered guidance is from currency, so looking through to how the actual business is doing isn't as bad as the ... guidance looks."
Shares of the one-time market darling dropped by C$2.49 to C$7.97 on the Toronto Stock Exchange and fell $3.36 to $9.79 on Nasdaq early on Thursday. In the last 12 months, the stock has lost about 84 percent of its value.
Until now, Lululemon had defied the slump in the retail sector, though it modestly cut its full-year profit forecast in June due to expansion costs.
"I think that the company has laid out a pretty negative expectation and do not expect more bad news unless the general environment gets worse than it is today or the U.S. dollar continues to rise," Price said.
The company said it was operating in an increasingly difficult environment, but believes its business model will prove resilient.
"During this current downturn we will operate our business prudently through careful inventory management, expense controls and conservative capital investments," Chief Executive Christine Day said in a statement.
RBC Capital Markets analyst Howard Tubin and Tal Woolley said in a note that Lululemon was expected to revise its outlook due to tough economic times, but that the company's forecast was well below expectations and "a kick in the chakras."
For the 13 weeks end Oct. 31, the company said profit rose 16 percent to $8.8 million, or 13 cents a share, from $7.6 million, or 11 cents a share, for the same time last year.
Analysts had expected, on average, a profit of 12 cents per share on both a net basis and before exceptional items, according to Reuters Estimates.
Revenue was 34 percent higher at $87 million.
Sales at stores open at least one year, a key measure of growth for retailers known as comparable-store sales, increased 4 percent on a constant-dollar basis. ($1=$1.25 Canadian) (Additional reporting Scott Anderson in Toronto; Editing by Jeffrey Jones)