Shares of Lululemon (LULU), the Canadian sportswear and yoga apparel maker, fell 4% this week after the company released financial guidance that disappointed investors.
On Monday, ahead of the company's fiscal fourth-quarter ending Feb. 3, Lululemon announced in a statement on its Web site "that net revenue will be at the high end of its original guidance range of $475 million to $480 million based on a comparable-store sales percentage increase in the high single digits on a constant-dollar basis."
Analysts had been expecting better than expected revenue near $490 million. The overzealous forecasts may have been predicated on the fact that the company has seen 13 consecutive quarters of double-digit same-store sales growth.
While Lululemon's stock was up more than 60% in 2012, fears over slowing sales led to the stock decline.
"The company now expects diluted earnings per share will be $0.74 for the quarter," according to a Lululemon statement. "The previous guidance for the fourth quarter was a range of 0.71 to $0.73. EPS guidance continues to assume 145.9 million diluted weighted-average shares outstanding and a 29.4% tax rate."
Does this news mean the yoga craze is coming to an end?
Howard Davidowitz, chairman of Davidowitz & Associates and a retailing expert, says no way.
"I think yoga gear is a great story," he says in an interview with The Daily Ticker. "I just think more people are getting into the game, like Gap (GPS) and American Eagle Outfitters (AEO). Frankly, I think they are doing everything right and they are a great place — nothing is forever."
Davidowitz says Lululemon is "going to have to find a way to get their business to the next level" whether it is "different price points" or "add on products." That said, he is very confident the company's management can make it happen.
"I think they are going to continue to be a great company because they do it better than anyone else," he notes, adding that he believes the company is a great buy.
"They are a cash machine," Davidowitz declares. "Everything about them is right." The problem is "there are more people in the same pond."
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