Lululemon Faces More PR Problems, and Restoration Hardware Soars After Hours

The blue chips lost 102 points today, while Lululemon encountered more PR issues. After hours, Restoration Hardware shares soared on a strong earnings report.

Jun 11, 2014 at 10:00PM

After several sessions of steady trading and new records, stocks took a hit today as the World Bank cut its forecast for global economic growth. As a result, the Dow Jones Industrial Average (DJINDICES:^DJI) finished 102 points lower, or 0.6%. The S&P 500 and the Nasdaq gave back 0.4% and 0.1%, respectively.

The World Bank, a financial arm of the United Nations charged with providing loans to developing countries, lowered its 2014 GDP growth outlook from 3.2% to 2.8%, citing the harsh winter in the U.S. and the ongoing crisis in Ukraine. While the news takes into account events the market has already factored in, the cut in the forecast is significant and also reflects slowing growth in China and Europe's difficulties in bouncing back from recession. The lending institution also cut its forecast for U.S. GDP growth from 2.8% to 2.1% because of the cold winter.

The surprise defeat of House Majority Leader Eric Cantor in a primary election by a Tea Party insurgent also may have caused a minor sell-off late in the session, as Cantor is seen as a Wall Street ally and the Tea Party has criticized corporate America. Cantor said he would step down from the leadership post at the end of the month. With the midterm elections less than five months away, national politics could become a greater focus for investors in the coming months.

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Turning to individual stocks, lululemon athletica (NASDAQ:LULU) was once again embarrassed by its founder, Chip Wilson, who criticized the company's new chairman, Michael Casey, and another director, saying he voted against them in board elections because he believes the company is too focused on short-term growth. Last year, Wilson was forced out of the chairmanship after he made off-color remarks about women's bodies, and in the past he's stirred controversy with offensive comments about Asians as well as some odd political opinions. Coming at a time when Lululemon is trying to repair a tarnished brand image after a 2013 that featured a massive product recall, the surprise resignation of its CEO, and Wilson's unfortunate comments, the founder's new airing of grievances does the company no favors. Wilson remains Lululemon's biggest shareholder, with 27% of its stock. Lululemon issued a press release in response, saying that the board is "committed to the value of the brand" and creating long-term shareholder value. Shares finished down 2.6% on the news.

After hours, shares of Restoration Hardware (NYSE:RH) were stacking higher, gaining 14% on a blowout earnings report. The home-furnishings retailer posted earnings of $0.18, beating estimates of $0.11, as revenues jumped 21.6% to $366.3 million, well ahead of the consensus at $346.8 million. Comparable brand revenue was up 18%, which includes e-commerce sales, and CEO Gary Friedman said the company outperformed the industry by a "wide margin" and said its real estate transformation was delivering "outstanding" results. The retailer's full-year EPS guidance was also ahead of the Wall Street view at $2.24-$2.30. Shares hit an all-time high after hours, and I'd expect them to continue to grow as the company's brand strength grow and it continues to add new stores.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends lululemon athletica. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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