Lululemon plunges after CEO criticizes bland products

Yogawear company hits eight-year-low

plummeted the most in more than eight years after the yogawear company offered a bleak forecast for the year, sparking concern that product misfires are causing customers to flee the brand.

The retailer said late Wednesday that earnings will be $2.26 to $2.36 a share this year — well below the $2.56 projected by analysts. Lululemon's revenue forecast also came in light of predictions.

Chief executive Laurent Potdevin said that weak ecommerce sales and a bland product line contributed to a “slow start” this year. Specifically, a lack of colour in its apparel turned off shoppers, he said. The Vancouverbased company has been hit by an industrywide discounting frenzy and mounting competition in athletic apparel, as well as sluggish foot traffic at many North American malls.

The stock declined more than 23 per cent to $50.60 in New York after the results were released, the biggest intraday drop since December 2008.

Lululemon had gained two per cent this year through the close of trading Wednesday.

The broader concern is that customers were so quick to abandon the Lululemon brand, said Camilo Lyon, an analyst at Canaccord Genuity Inc. who recommends selling the stock.

“We see a larger issue brewing,” Lyon said in a report Thursday. “Pricing, competition and/or fashion alternatives were a strong enough force to drive the consumer away, and thus will make it that much more difficult to recapture her.” Lululemon stocks dropped by 23 per cent in New York after the retailer forecast earnings will be $2.26 to $2.36 per share this year, below expectations of $2.56.

Paul Lejuez, an analyst for Citigroup Inc., was one of several analysts that downgraded the stock after the forecast was released. He lowered his rating to neutral from a buy recommendation on Thursday.

Lululemon still “has significant room to grow the brand,” he said in a report. “However, the path to longterm growth is not as visible against the backdrop of the current weakness.”

Lululemon's woes extend a punishing year for athletic brands. shares suffered their own rout last week after sales missed estimates, hurt by pressure from and

meanwhile, saw its stock tumble as well after giving a weak outlook earlier this month.

Gander Mountain Co., a chain of hunting and fishing shops, and Performance Sports Group Ltd., which sells skates, bats and other equipment, both have filed for bankruptcy in recent months. Performance won court approval in February to sell almost all its assets, including its Bauer hockey and Easton baseball divisions.

At Lululemon, revenue is expected to be US$2.55 billion to US$2.6 billion this year. Analysts had estimated US$2.62 billion. That outlook disappointed investors after a fairly strong holiday season. Same-store sales grew seven per cent in the fourth quarter, better than the 5.3 per cent average estimate compiled by Consensus Metrix.

Sales on that basis will be down in the low single digits during the first quarter, Lululemon said. Still, the company expects them to grow in the low single digits over the full year.