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Weak Guidance Overshadows Lululemon's Impressive First Quarter

Weak Guidance Overshadows Lululemon's Impressive First Quarter
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Canadian yoga-inspired athletic apparel company Lululemon Athletica, Inc. (LULU: Quote,LLL.TO: Quote) reported Thursday a profit for the first quarter that increased 40 percent from last year, boosted by a 53 percent increase in global sales.

Earnings per share and quarterly revenues grew and came in above analysts' expectations. However, the company's shares are trading down 11 percent in pre-market activity as guidance for the second quarter and full-year 2012 were below Street view.

The Vancouver, Canada-based company posted net income of $46.64 million or $0.32 per share for the first quarter, higher than $33.37 million or $0.23 per share in the prior-year quarter.

On average, 20 analysts polled by Thomson Reuters expected earnings of $0.30 per share for the first quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter surged 53 percent to $285.70 million from $186.78 million in the same quarter last year, and topped nineteen Wall Street analysts' consensus estimate of $270.85 million.

Comparable-store sales for the quarter grew 24 percent or 25 percent on a constant dollar basis, compared to 19 percent or 16 percent on a constant dollar, in the prior-year quarter.

However, operating margins for the quarter contracted 210 basis points to 25.6 percent, reflecting 370 basis points decline in gross margin, partially offset by a 160 basis points reduction in selling, general and administrative expenses as a percentage of revenues.

Inventory at the end of the latest quarter was $107.7 million, compared to $64.4 million at the end of the year-ago quarter.

"Our strategy to increase inventory levels led to strong revenue growth and earnings performance in the first quarter as our guests responded well to our spring styles and colors," CEO Christine Day said in a statement.

Looking ahead to the second quarter, Lululemon projects earnings in a range of $0.28 to $0.30 per share, on anticipated quarterly revenues between $273 million and $278 million, based on a comparable-store sales percentage increase in the low double digits on a constant-dollar basis.

Analysts expect the company to report earnings of $0.33 per share for the second quarter, on revenues of $289.78 million.

For fiscal 2012, the company currently anticipates earnings in the range of $1.55 to $1.60 per share, on projected annual revenues between $1.32 billion and $1.34 billion, up from the prior guidance for earnings in the range of $1.50 to $1.57 per share, on revenues between $1.3 billion and $1.325 billion.

Street is currently looking for full-year 2012 earnings of $1.63 per share, on annual revenues of $1.35 billion.

LULU closed Wednesday's regular trading session at $70.02, down $1.44 on a volume of 4.23 million shares. LLL.TO closed on the Toronto Stock Exchange at C$72.06, down C$1.77 on a volume of 0.13 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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