NEW YORK (TheStreet) -- Lululemon (LULU - Get Report) bombed on Monday after updating fourth-quarter guidance ending Feb. 2 which came in well below Wall Street's expectations. Over the session, shares fell 16.6%.
The athletic apparel company said it now expects revenue between $513 million and $518 million and net income in the range of 71 cents to 73 cents a share. Management had previously estimated revenue between $535 million and $540 million and earnings of 78 cents to 80 cents a share. The Vancouver-based business said it expects comparable-store sales to fall in the low-to-mid single digits, compared to previous estimates of flat comparable-store sales.
The updated guidance falls significantly short of consensus. Analysts polled by Thomson Reutershad expected net income of 79 cents a share on $539.87 million in revenue.
On Tuesday, BMO Capital Markets' analyst John D. Morris reiterated a "market perform" rating but lowered his target price to $50 from $59.
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"For now, we remain on the sidelines: while we continue to see the incoming CEO Laurent Potdevin as capable, with a history in related wholesale experience, it will take some time, and we expect hiccups along the way," wrote Morris in the report.
"Our field work continues to indicate product with quality issues on shelves, which at some point, we believe, risks harming the brand reputation. The new supply chain team, we believe, is taking steps in the right direction, but still has a ways to go; and while global expansion presents tremendous opportunity, it also presents distraction."
BMO Capital Markets lowered its fourth-quarter earnings estimate to 73 cents a share from 80 cents a share, and full-year 2014 earnings to $2.13 a share from $2.20 a share.
D.A. Davidson & Co, meanwhile, reiterated Lululemon as a "buy", noting while the recovery timeline is murky, it is not broken. Analyst Andrew Burns' price target was lowered to $64 from $73.
"Sentiment likely remains challenged until 2014 earnings guidance provided and business stabilizes. We are disappointed in both the magnitude and timing of this earnings shortfall considering the relative unimportance of January after being "on plan" through December," wrote Burns in the report.
"Even though the bad news is now out, the stock will likely continue to struggle until a 2014 earnings baseline is provided on the 4Q call in March. Longer-term, we continue to believe 2014 can be a recovery year where execution improves, international growth potential is validated and the company can rebuild investor confidence/sentiment. LULU remains a leading athletic apparel brand with phenomenal store productivity and ample growth drivers ahead (new stores, ecommerce, international)."
D.A. Davidson predicts fourth-quarter earnings of 72 cents a share on $515 million in revenue and full-year earnings of $2.11 a share on $1.827 billion in revenue.