Please ensure Javascript is enabled for purposes of website accessibility

Why Lululemon Athletica Stock Dropped 11% This Morning

By Dan Caplinger - Sep 10, 2015 at 11:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

11 a.m. ET: The yoga-apparel retailer issued downbeat guidance for the current quarter, overshadowing solid growth in its latest quarterly financial report.

What's happening: Shares of Lululemon Athletica (LULU -0.14%) were down 11% as of 11 a.m. EDT Thursday following the yoga-apparel retailer's fiscal second-quarter financial report earlier in the morning. The company posted solid revenue growth of 16% on an 11% rise in total comparable sales, but although earnings topped expectations, Lululemon said that it expected fiscal-third-quarter earnings to fall by as much as a sixth from year-ago levels, defying investor expectations for modest bottom-line growth.

Image: Lululemon Athletica.

Why it's happening: Lululemon has done a good job in restarting sales growth in the aftermath of its quality-control controversies in recent years, as CEO Laurent Potdevin and his executive team have undone much of the damage done under previous leadership. Yet even though top-line performance has been solid, Lululemon has seen a precipitous drop in margins, suggesting that the retailer is making concessions based on price in order to keep customers loyal to the brand.

At this point, Lululemon seems to be moving in several different directions at the same time, ranging from attempts to shore up its core women's apparel lines to fostering the growth of its budding men's segment and its ivivva children's stores and even releasing a craft beer. To convince investors that its turnaround can last and continue, Lululemon will need to focus on its most promising opportunities, and until its efforts show more results, shares could remain under pressure for a while.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
$272.14 (-0.14%) $0.38

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.