Lululemon Beats Q4 Estimates but Outlook weighed by Product Recall (LULU)

Athletic and yoga pant maker, Lululemon Athletica Inc. (NASDAQ: LULU) reported better-than-expected fiscal fourth quarter earnings and revenue on Thursday; nonetheless, the Company warned that fiscal first quarter and full-year results will feel the pinch due to a product recall.

Earlier on Monday, Lululemon said that it will pull out 17% of its renowned black Luon pants from the shelves after it was found that certain batch had “unacceptably high level of sheerness”, adding that its top line and same-store-sales will be impacted in the first quarter.

The financial results, which were announced today, did not feel the impact because it covered the period before the Company decided to roll back defected black Luon pants.

For the fiscal first quarter, the Vancouver Canada based Company expects earnings to be in the range of 28 cents to 30 cents compared to 32 cents, reported in the year earlier quarter. Lululemon said that product recall will dent earnings per share by 11 to 12 cents.  Analysts’ consensus estimate was for earnings of 39 cents a share, according to a data compiled by FactSet Research.

The Company reiterated its revised revenue guidance (initially provided  on Monday) which is between $333 million and $343 million down from its earlier guidance of $350 million to $355 million. Analysts’ earlier forecast was for $352.1 million.

For the fiscal 2013, Lululemon expects earnings to come in the range of $1.95 a share to $1.99 a share on revenue of $1.62 billion to $1.64 billion. Analysts’ consensus estimate was for earnings of $2.16 a share on revenue of $1.68 billion.

For the fiscal fourth quarter ended Feb 3, the Company reported net income of $109.4 million or 75 cents a share compared to a profit of $73.5 million or 51 cents a share.

Analysts’ consensus estimate was for earnings of 74 cents a share.

Revenue during the period leaped 31% to $485.5 million from $371,5 million, beating Street’s forecast of $482.2 million.

Same-store-sales jumped 10% in the fourth quarter.

For the fiscal 2012, the Company reported net income of $270.6 million or $1.85 a share.