Lululemon Athletica, the Canadian yoga wear firm, reported a 59.9% drop in first quarter net income, attributed to a one-time tax adjustment. In response to the news, the company’s share price fell almost 16 percent in morning trading Thursday, and was down 15.1% at the end of the trading day.
For the three months ended May 4, Lululemon posted net income of $19 million, or 13 cents per diluted share. For the same period last year, the company posted net income of $47.3 million or 32 cents per diluted share.
First quarter net revenue beat Wall Street expectations, increasing 11.2% to $384.6 million, up from $345.8 million for the same period in 2013.
In a pessimistic downward revision of anticipated total annual earnings, Lululemon said earnings per share could range from $1.71 to $1.76, excluding the one-time tax adjustment. The previous forecast was for $1.80 to $1.90 earnings per share. Total revenue for 2014 was forecast at between $1.77 billion and $1.8 billion.
Lululemon CEO Laurent Potdevin, said, “Despite a reduced outlook, I am confident that the work we are doing today will only enhance our premium positioning as we continue to lead as the market innovator.”
The retailer incurred a tax liability of $52.5 million by repatriating foreign earnings, as planned. The cash will be used to fund a $450 million buy-back program of Lululemon’s common stock on an effort to beef up shareholder value.
In a boardroom move Wednesday Lululemon’s company founder Chip Wilson voted against the re-election of two sitting board members who were not connected to the firm. Wilson, himself a 27 percent shareholder in the company, said board changes are needed to help boost shareholder value.
Lululemon also announced Thursday that its chief financial officer John Currie intends to retire by the end of the fiscal year.
Despite lowered earnings estimates and boardroom turmoil, Potdevin said, “We are pleased that Q1 results were slightly ahead of our expectations. 2014 is very much a transitional year for lululemon, and we are on track with the improvements we have set out to achieve. We are focused on building a scalable foundation to further elevate our North American business and pursue the brand’s incredible international potential.”