* Q4 adjusted EPS $0.64 vs forecast $0.57
* Revenue up 53 pct; same-store sales up 28 pct
* Strong Q4 sales to result in unmet demand in Q1
* Shares down 5.5 percent in Toronto
(Adds analyst, executive comments. In U.S. dollars unless
By S. John Tilak
TORONTO, March 17 Yoga and athletic-wear
retailer Lululemon Athletica Inc LLL.TO (LULU.O), whose
shares have more than doubled in the past year on phenomenal
growth, said on Thursday it is not able to meet demand in the
current quarter, sending its shares down 5.5 percent.
Huge demand for such products as its nearly $100 stretchy
yoga pants during the holiday season -- which led to Lululemon
reporting a better-than-expected fourth-quarter profit -- has
shrunk inventory, the Vancouver-based specialty clothier said.
The inventory problems as well as a muted financial outlook
and expectations of cost pressures in 2011 overshadowed its
robust results and pushed Lululemon's stock C$4.38 lower to
C$75.35 on the Toronto Stock Exchange on Thursday afternoon.
That is down C$9 from the record high of C$84.36 it hit
last month. It has more than doubled in the last 52 weeks,
The investor response showed how expectations for
Lululemon, which has topped profit estimates for several
quarters, have increased to a point where even a small hiccup
will not be met kindly.
"Given a positive streak of outperformance and increased
guidance over the past few quarters, we believe investors have
become accustomed to this trend," Morningstar analyst Zoe Tan
Lululemon has had to spend more on air freight to boost
stock at stores, and analysts expect it to invest more on
technological and management systems to cope with the growth.
"I'm optimistic that (the inventory situation) will be
largely rectified as we exit the first quarter," William Blair
analyst Sharon Zackfia said. "It may be dampening results
somewhat, but they're still putting up some of the best sales
results in all of retail."
A top concern has been whether Lululemon can sustain
momentum. It forecast 2011 revenue growth of 24 percent to 26.5
percent. Analysts were looking for growth of 26 percent.
Revenue surged 57 percent in fiscal 2010.
Lululemon forecast first-quarter earnings of 36 cents to 38
cents a share, compared with an average analyst forecast of 36
Mark Schultz, portfolio manager at the MTB Mid-Cap Growth
Fund, said he was not worried about Lululemon's inventory
troubles. He said he would be more concerned if the company was
experiencing weak demand.
"I don't see anything in the quarter that is inconsistent
with a company that is on a very strong growth trajectory. The
numbers are very solid," Schultz said.
Earnings for the quarter to Jan. 30 rose 93 percent to $55
million, or 76 cents a share, from a year-earlier $28.5
million, or 40 cents a share.
Excluding items, Lululemon earned 64 cents a share, beating
the average analyst forecast by 7 cents, according to Thomson
Revenue jumped 53 percent to $245.4 million, above
analysts' expectations of $239.3 million.
Sales at stores open for at least a year, a key measure for
retailers, rose 28 percent.
After blazing a trail in Canadian yoga studios and gyms,
Lululemon has moved aggressively into the United States, where
it now operates 82 stores. That compares with 44 in Canada.
It is looking to open 30 stores this year, Chief Financial
Officer John Currie said on a conference call with analysts.
Lululemon also aims to boost e-commerce sales.
The company, whose premium-priced apparel is known for
fashion and function, is benefiting from people seeking active
and healthier lifestyles in an improving economy.
"Consumers of all ages are looking to live a healthier
lifestyle. That favors the activewear market," said Marshal
Cohen, chief industry analyst at retail market researcher NPD
Group. "But it's clearly going to breed competition.
Everybody's going to say, 'Hey, they're getting growth. We
should find a way to open a similar business and try to get
some of that growth'."
Athletic wear companies such as Nike (NKE.N), Adidas
(ADSGn.DE) and Under Armour (UA.N), as well as other retailers
such as Limited Brands Inc LTD.N-owned Victoria's Secret are
selling yoga wear. Gap Inc (GPS.N) recently opened its first
Athleta store specializing in women's activewear.
(Reporting by S. John Tilak; Editing by Lisa Von Ahn, Dave
Zimmerman and Peter Galloway)