Lululemon Athletica  on Thursday gave a weak outlook for its current quarter and full year, despite posting better-than-expected results for its holiday quarter as traffic improved.
Shares fell 3.2 percent in premarket trading.
For the first quarter, Lululemon forecast per-share earnings of 31 cents to 33 cents, below analysts’ call for 39 cents a share, according to Thomson Reuters. The retailer forecast revenue of $413 million to $418 million, missing the $442 million in revenue analysts had forecast.
For the year, the company forecast per-share earnings of $1.85 to $1.90, while analysts had expected $2.06 a share in earnings. Revenue is expected to be in the range of $1.97 billion to $2.02 billion. Analysts had expected $2.05 billion in revenue for the year.
Analysts have said Vancouver, Canada-based Lululemon may be on the cusp of a turnaround after setbacks stemming from a recall of some yoga pants for being too sheer. The recall, which dented its reputation and cost it tens of millions of dollars, was followed by a shift in consumer tastes toward more elaborate designs over basics that caught Lululemon flat-footed as it struggled to improve quality and quell infighting on its board and high executive turnover.
Lululemon has revamped its product line to include more embellished and patterned items now fashionable among its customer base as it pushes back against competition from lower-priced rivals such as Gap Inc.’s Athleta brand. The new approach, however, has increased lead times and depressed margins, as printed fabric is more expensive to produce than basic black or gray. The retailer is also struggling with West Coast port delays and a lower Canadian dollar.
In the latest quarter, which includes the key holiday shopping season, gross margin narrowed to 51.5 percent from 53.5 percent a year earlier.
The yoga-wear company had originally given a disappointing outlook for the quarter, but in January boosted its forecast and said it entered the new year in “very good shape” thanks to improving trends and strong results during the holidays.
Inventory pileup has been a problem for Lululemon in recent quarters as it has struggled to strike the right balance of seasonal and core merchandise.
Overall, for the period ended Feb. 1, Lululemon posted a profit of $110.9 million, or 78 cents a share, up from $109.7 million, or 75 cents a share, a year earlier. The company had forecast earnings of 71 cents to 73 cents a share.
Revenue grew 16 percent to $602.5 million, topping the company’s projection for $595 million to $600 million. Lululemon’s comparable-store sales increased 5 percent, excluding currently fluctuations, while direct-to-consumer net revenue increased 20 percent.