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Lululemon falls as profitability concerns outweigh earnings beat - BNN Bloomberg

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Lululemon shares dropped as lower-than-expected profitability raised concerns about a pileup of inventory, while the the yogawear maker’s full-year sales forecast disappointed Wall Street.

Gross margin, a key gauge of profitability was 55.9 per cent in the third quarter, short of analysts’ average estimate of 56.7 per cent. Inventories also surged from a year earlier — evoking similar problems experienced by retailers that have led to profit-busting markdowns.

Lululemon raised its sales forecast for the full year ending in January to as much as US$7.99 billion. Whle that’s up from the previous range of as much as US$7.94 billion, the low end was still below analysts’ average estimate. Chief Executive Officer Calvin McDonald said the company hasn’t seen “any significant shift in spending among our guests.”

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