These are stories Report on Business is following Friday, June 13, 2014.
Zen and the art of Lululemon maintenance
Chip Wilson is no doubt breathing a sigh of relief this morning as the carnage in Lululemon Athletica Inc.’s stock price appears to be over after a two-day rout.
Mr. Wilson, the former CEO who made fun of your thighs, holds 27 per cent of the yoga wear retailer’s shares, which lost 2.6 per cent Wednesday and almost 16 per cent yesterday.
As The Globe and Mail’s Marina Strauss reports, Wednesday’s losses came after Mr. Wilson unsuccessfully took on two Lululemon board members, and yesterday’s came in the wake of a disappointing first-quarter report and outlook.
The retailer’s profit plunged to $18.98-million (U.S.), or 13 cents a share from $47.28-million or 32 cents a year earlier.
Revenue edged up, though growth in same-store sales, a key measure in retailing, was lame.
“We fear the consumers’ frustrations with the lack of fresh product will result in traffic declines that will be tough to reverse this year,” analyst Camilo Lyon of CanaccordGenuity said today as he slashes his price target on the stock to $42 from $69.
“We are stepping to the sidelines until we see evidence that LULU’s new fashion product is received well,” he added, referring to the company by its U.S. symbol, though he said “we believe the brand is relevant and has robust long-term growth opportunities.”
Mr. Wilson said this week that he thought a change on the board is needed “to increase shareholder value.”
Forbes pegs his net worth at $1.7-billion, down by almost $284-million, or 14 per cent, by this morning.
Lululemon shares have lost more than 35 per cent over the past year.
- Marina Strauss: Scared investors flee as Lululemon cuts outlook
- David Parkinson in ROB Insight (for subscribers): Breathe deeply, Lululemon, it's time to stretch in a new direction
- Boyd Erman in Streetwise (for subscribers): Chip Wilson: Just venting or something more at Lululemon?
- Marina Strauss and Brent Jang: Lululemon founder triggers board battle over strategy
Pound spikes on Carney comments
Mark Carney sent the British pound sharply higher when he warned last night that he’s likely to hike interest rates earlier than investors anticipate.
The Bank of England governor – he used to be ours – took investors by surprise with his suggestion that the central bank’s benchmark rate could climb “sooner than markets currently expect.”
He was “clear and concise” in his speech late yesterday, said chief currency strategist Camilla Sutton of Bank of Nova Scotia, sending the currency up more than 1 per cent from where it sat at yesterday’s open.
“The market had been pricing in one interest rate hike in the next 12 months and this has jumped to an 80-per-cent chance of two hikes,” she said.
“However, Governor Carney was quick to warn that the timing of the first rate hike is less important than the path thereafter and that this path is likely to be gradual and limited.”
Canadian factory sales dipped in value in April, pulled lower by aerospace and oil and coal, and marking the first drop in four months.
The loss of 0.1 per cent reported by Statistics Canada Friday went counter to the expectations of economists, who had been forecasting an increase of 0.5 per cent or better.
But sales were also pulled down by lower prices, the agency said, while volumes rose 0.4 per cent.
“The increase in the volume figures should offset some of the disappointment from the headline miss,” said economist Nick Exarhos of CIBC World Markets.
The big hit came in the oil and coal industries, which lost 5 per cent, with sales at $6.9-billion.
“The decline was caused by partial shutdowns at several refineries for maintenance and retooling work,” Statistics Canada said.
“Although such work is common during the spring months, the partial shutdowns were more extensive than usual in April.”
Streetwise (for subscribers)
ROB Insight (for subscribers)