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Lululemon 3Q profit falls, issues weak outlook

NEW YORK (AP) -- Lululemon Athletica Inc. said Thursday that its profit slipped in its fiscal second quarter as a higher tax rate more than offset a jump in sales.

The results beat Wall Street predictions, but the Canadian yoga clothing maker issued a weak outlook for the current quarter and cut its predictions for the full year.

Its shares dropped $4.14, or 6 percent, to $64.88 in premarket trading about 30 minutes ahead of the market opening.

Vancouver-based Lululemon has struggled this year amid a recall of its Luon line of yoga pants over complaints that they were too sheer. And in June, the company said that its CEO would leave after a replacement was found.

For the quarter ended Aug. 4, Lululemon reported net income of $56.5 million, or 39 cents per share, down from $57.2 million, or 39 cents per share, in the same quarter the year before.

Revenue rose 22 percent to $344.5 million from $282.6 million.

Analysts, on average, expected a profit of 35 cents per share on $343.9 million in revenue, according to FactSet.

The revenue growth included an 8 percent increase in revenue at stores open at least a year. The metric is a key measure of a retailer's health, because it excludes revenue at stores that recently opened or closed.

The company's tax rate jumped to 30 percent from 19 percent a year ago. The year-ago rate included a positive adjustment of $7.2 million related to the reversal of previous taxes.

For the current quarter, Lululemon projected a profit of 39 cents to 41 cents per share on $370 million to $375 million in revenue. Analysts expect earnings of 45 cents per share on $390.1 million in revenue.

For the full year, the company said it now expects earnings of $1.94 to $1.97 per share on $1.63 billion to $1.64 billion in revenue. That's down from its June predictions of earnings between $1.96 and $2.01 per share and revenue of $1.65 billion to $1.66 billion.