Lululemon Sinks as Cautious Outlook Disappoints Wall Street

(Bloomberg) -- Lululemon Athletica shares fell as much as 9.7% on Wednesday, the biggest one-day drop since March 16, after the company’s second-half forecast disappointed investors.

Some analysts also said fiscal second-quarter earnings and sales may have trailed investors’ expectations, despite having beaten the average of published estimates.

Including the acquisition of at-home fitness device maker Mirror, executives said earnings per share in the current period, Lululemon’s fiscal third qurater, would decline around 15% to 20% year-over-year, and show modest declines in the fourth quarter. Analysts had projected a low-single digit drop in the third quarter and growth in the fourth quarter.

With today’s drop the stock has now fallen for four consecutive sessions, the longest decline streak since June 26. Shares were up 38% for the year, compared with a gain in the S&P 500 of 5%. Shares also outperformed the 14% increase for althetic-wear peer Nike.

The second quarter was “good, not great (and it needed to be great),” said Paul Lejuez, an analyst at Citigroup Inc., in a note. “While the business is doing well relative to other mall-based peers, capacity constraints in stores and additional investments in the business may hold back the recovery in sales/EPS through the remainder of 2020.”

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