lululemon athletica (LULU) is down 21% premarket after the company reported fourth quarter results in-line with guidance but more importantly guided first quarter and fiscal 2018 earnings and sales well below consensus.
The company best known for its high-end yoga pants raised the low end of its fourth quarter guidance at the ICR Conference on January 9: lululemon raised Q4 EPS guidance to $0.99-1.01 from $0.96-1.01 and raised revenue to $775-785 million from $765-785 million.
Lululemon had a strong fourth quarter, total comparable store sales (including direct-to-consumer/online) increased 7% in constant currency versus mid-single digit guidance. Comparable store sales grew 6%, an impressive feat given the struggles most retailers are having with traffic.
Unfortunately, the company offered guidance for the first quarter and full year that disappointed investors.
Lululemon guided for a first quarter total comparable sales decline in the low single digits, well below estimates. Aside from the soft traffic that is impacting the retail sector, a lack of color in the spring assortment has hurt sales in February and March.
For fiscal 2018, guidance for a low single digit comp increase compared to estimates above 5%.
Aside from management's miss-steps, margin initiatives remain on track.
Still, at least four firms have downgraded the stock this morning.
As a result, the stock is down 21% premarket and has broken through support from late 2016 in the mid-$50s.
At $52/share, the $7.2 billion market cap equates to 22.5x the midpoint of $2.26-2.36 EPS guidance for the year, ~in-line with NIKE's (NKE) earnings multiple.