Lululemon Still Feeling Effects of Pant Recall
The big Luon debacle is still reaping havoc on Lululemon and will probably haunt Christine Day through the remainder of her days as Lululemon Atheltica's Inc.'s CEO.
Even though second quarter results were down less than expected and better than the company's (or Wall Street's) expectations, shares of the Vancouver-based company fell $3.75, or 5.4 percent, to $65.27 yesterday after lowering its profit and sales guidance for the year.
WWD reports that during a conference call, John Currie, their chief financial officer, accounted the lowered guidance to the Luon recall and the domino effect it has had. While the company focused on restocking first-quality Luon product, other deliveries got held up. "While we were successful in getting back in stores with Luon, the effort required to get there had a lingering impact on our commercialization and sourcing team's ability to be ready to hand off to our vendors the current season. We anticipate this knock-on effect to continue to impact timing of product deliveries in [the third quarter] and through the balance of the year."
Full-year earnings are now expected to be in the range of $1.94 to $1.97 with revenues of between $1.63 billion to $1.64 billion. The June guidance was for earnings per share of $1.96 to $2.01 and revenues of $1.65 billion to $1.67 billion.
Lululemon had enjoyed nearly uninterrupted growth in its market capitalization since 2007 when they went public. But its shares took a tumble in March after the black Luon recall, and then again in June, when Day disclosed her plans to leave Lululemon.
Day announced in June that her tenure as CEO will end upon the appointment of a successor. During the conference call she commented that the search for her replacement is continuing, with the narrowing of the list from "several high-caliber candidates" to a CEO designee in the "coming months."
"The start date for the successful person will be dependent on the required notice period, move to Vancouver, etc.," she told analysts.
There has been progress made on several other vacancies: Steven Berube, formerly vice president of production, distribution and customer service at Cole Haan, has joined Lululemon as senior vice president of distribution and logistics; Jennifer Battersby, formerly senior vice president of Mast Industries with responsibility for Victoria's Secret's production in Asia, has joined the team as senior vice presiden of sourcing, quality and commercialization.
The executive vice president of product post has yet to be filled, and Day said management of that appointment is likely to be "coordinated with the ceo hire."
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