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Yogawear retailer Lululemon Athletica Inc. (LLL-T) reported higher first-quarter profit on Thursday, but inventories rose, and the company said growth in same-store sales would slow, sending its shares down in premarket trading.
Lululemon is rapidly expanding in the United States, but any sign that its growth might falter has spooked markets in recent quarters.
"It's just another typical Lululemon release, where good is not going to be good enough," said Brian Sozzi, chief equities analyst at NBG Productions.
Sozzi said guidance was a little disappointing, but he noted that the company tends to guide conservatively. He was more concerned by inventory, which grew much more quickly than same-store sales.
Inventory at the end of the quarter was $107.7 million US, compared with $64.4 million at the end of the same quarter last year.
The company, which targets its premium yoga and, increasingly, running gear at young, professional women, has actually worked to boost inventory in recent quarters.
Last year, Lulu's premium yoga pants and other products sold faster than it could restock, holding back overall sales. The company has said several times that its now-higher inventory would help it meet demand better.
In the first quarter ended April 29, same-store sales climbed 25 percent on a constant-dollar basis, beating the company's forecast for a gain in the low 20s.
The Vancouver-based company said comparable store sales, a key measure for retailers, would grow in the "low double digits" in the current quarter.
Second quarter outlook for revenue and earnings came in below expectations. The company forecast net revenue from $273 million to $278 million, compared with consensus $289.8 million, according to Thomson Reuters I/B/E/S.
It saw earnings from 28 to 30 cents a share, below the consensus forecast of 33 cents a share.
Lululemon's U.S. listed shares fell 14.3 percent to $60.03 in premarket trading.
The company said first quarter net income rose to $46.6 million, or 32 cents a share, from $33.4 million, or 23 cents, a year earlier. Net revenue jumped 53 percent to $285.7 million.
Analysts, on average, had expected earnings of 30 cents a share on revenue of $270.9 million, according to Thomson Reuters I/B/E/S.
-with files from BNN.ca staff