Lululemon Tanks on Guidance Woes
Shares of Lululemon Athletica (NASDAQ:LULU) were put under fire after the company reported its highly anticipated results before the market open on Thursday. In recent days traders have been actively positioning themselves for the quarter. At the close on Wednesday, at the money straddles were showing a 7.5 percent expected move on the back of high implied volatility. Large put buyers were driving high premiums at contracts far out of them money. Moreover, just a couple days before the quarter, the company announced it would be switching things up at the top with a Chief Executive Officer change to start the new year.
Lululemon reported third quarter earnings of $0.45 per share, beating expectations of $0.41 per share. During the quarter, the company generated comparable store sales growth of 5% at the yoga apparel retailer. This compares to expectations for a 5.3% gain. Net income for the third quarter rose to $66.1 million, or 45 cents per diluted share, from $57.3 million, or 39 cents, in the same period a year ago.
The company forecasted earnings between 78 and 80 cents a share, and revenue from $535 million to $540 million. Analysts were expecting earnings of 84 cents a share on revenue of $571.8 million.
Going forward, analysts will be looking at holiday guidance for an indication of fourth quarter strength. The company is currently trading at a lofty price to earnings ratio in comparison with the rest of the consumer discretionary sector. At the time of this writing, shares of the company were significantly lower in the pre-market session. At the opening bell, shares are expected to open around $62 per share, down roughly 9 percent on the day. It will be interesting to see if shares rebound on the weak market session or remain on a downward path throughout the day.
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