NEW YORK (TheStreet) -- Lululemon's (LULU) founder Dennis "Chip Wilson" unloaded 13.85% of his stake in the athletic apparel maker to private-equity firm Advent and the timing of the announcement is a red-flag warning on Lululemon's outlook for the remainder of 2014.
Lululemon, which my firm, Belus Capital Advisors, rates a sell, will announce its second-quarter earnings on Sept. 11, its second full period with CEO Laurent Potdevin at the helm. When it announced its first-quarter earnings in June, Lululemon warned about sales and profits in large part because of investments being made in the supply chain and product quality. For the second quarter, Lululemon called for revenue of $375 million to $380 million based on a comparable-store sales decrease in the low- to mid-single digits. Earnings per share are expected to be in the range of 28 cents to 30 cents.
The company said it expected revenue for 2014 in the range of $1.77 billion to $1.8 billion based on a comparable-store sales increase in the low-single digits. Earnings for 2014 were guided to $1.50 to $1.55 a share, or $1.71 to $1.76 on an adjusted basis.
If Wilson believed that the second quarter would mark the reemergence of Lululemon as a darling of Wall Street amid strengthening fundamentals, why didn't he hold the stock on the premise that it would gain significant value on earnings day? Should that have happened, Wilson could have realized more value for his stake and as a voice as a Lululemon director.