Yogawear chain Lululemon sees earnings below analysts' forecasts

Canadian yogawear retailer Lululemon Athletica reported better than expected fiscal fourth-quarter earnings on Thursday, but a much weaker than expected outlook sent its shares tumbling 5 percent in early trading.

Lululemon, which warned in January that margins would trough in 2015 as it continues to invest more in improving quality and solving supply-chain problems, said it plans to accelerate its investments in innovation to drive sustainable global growth.

The Vancouver-based company forecast earnings of 31 to 33 cents a share for the current quarter on net revenues of $413 million to $418 million. Analysts, on average, were expecting a profit of 39 cents a share on revenue of $442 million, according to Thomson Reuters I/B/E/S.

It also forecast fiscal full year earnings of $1.85 to $1.90 a share, on revenues of $1.97 billion to $2.02 billion. On that basis, analysts had expected earnings of $2.06 on sales of $2.05 billion.

Lululemon said it expects its total comparable sales, which includes same-store and online sales, to increase in the "low single digits" in the first quarter, and rise in the "mid single digits," over the course of its fiscal year that ends early in 2016.

The outlook sent its shares sliding $2.96 to $58 in trading before the morning bell in New York on Thursday.

The shares have declined some 10 percent since the beginning of March, after having rallied for months amid signs that the company was finally getting back on track after a high-profile yoga pants recall kicked off a series of PR snafus, and led to executive changes and a supply chain overhaul.

The latest market data shows that short interest positions in Lululemon have roughly halved in the last nine months, down to 14.3 million from over 27 million shares last June, showing that sentiment around the company has improved significantly.

Lululemon said net profit for the fourth quarter ended Feb. 1 rose to $110.9 million, or 78 cents per share, from $109.7 million, or 75 cents per share, a year earlier.

Total comparable sales rose 8 percent, while net revenue jumped 16 percent to $602.5 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," said its Chief Executive Laurent Potdevin, in a statement.

$1 = £0.67