Lululemon's fight with its founder has been bad enough to hurt sales for the entire year

By Bill Peters

Shares sink in extended trading after the company trims its outlook, as its turnaround efforts stumble

Some analysts have criticized Lululemon for straying from its core technical workout-wear business.

Lululemon's very-public board dispute with its founder and see-through issues with some workout wear have brought enough drama to damage its sales and profit expectations for the rest of this year.

Shares of the yoga-wear maker (LULU) tumbled 11% after hours on Thursday, after management trimmed its full-year outlook, citing the bad press as well as new products that haven't resonated with customers.

Over this year, Lululemon's Get Low line of workout wear faced complaints that the fabric was too sheer, as well as similar issues for other products. In response, Lululemon's founder, Chip Wilson, who has a roughly 8.7% stake in the company and was trying to shake up its board, said the company had "lost its cool" and "completely lost its way." The company and Wilson resolved their dispute last month.

Meghan Frank, Luluemon's interim co-CEO and chief financial officer, said during Lululemon's earnings call on Thursday that the company "experienced spikes of negative commentary in the media and on social channels with regard to our brand," weighing on retail traffic and sales.

"These stories have died down and subsided," she said later. "But we have not yet seen a return to our pre-disruption trend."

She also said the newer, looser-fitting pants that the company refers to as "away from body" offerings drew a good response from customers, but still underperformed.

"So far, the campaign hasn't had the expected halo effect on other areas of our assortment," she said, adding that some of the issue came down to the color of the gear itself.

Lululemon's after-hours drop on Thursday extended the stock's slide this year, as the company navigates uncertainty around its leadership, style choices and competition. Lululemon has been trying to throw new products at those issues, but the stock is down nearly 40% year to date.

Lululemon said it now expects full-year sales of $11 billion to $11.15 billion, representing a range of flat to down 1% from the prior year. In March, the company said it expected revenue of $11.35 billion to $11.5 billion, which would have amounted to modest sales growth.

The company also cut its per-share profit outlook to between $10.95 and $11.15, whereas it previously expected $12.10 to $12.30.

For the first quarter, Lululemon said same-store sales rose 1%, beating Wall Street analysts' estimates of a 0.2% decline. The company earned $1.69 a share, topping expectations by a penny. Revenue rose 4% to $2.47 billion, above forecasts for $2.43 billion.

As part of its agreement with Wilson, Lululemon last month agreed to appoint two of Wilson's preferred candidates to the board after its annual shareholder meeting. Lululemon also agreed to bring aboard another director with expertise in apparel by Oct. 1.

Wilson had been trying to shake up the board in the face of steep competition from brands like Vuori and lower-priced alternatives. Some analysts also believe Lululemon has strayed from the technical workout wear that made it popular, instead offering things like rugby shirts.

Nike (NKE) veteran Heidi O'Neill will become Lululemon's new CEO in September. But analysts have had questions about her appointment, given Nike's ongoing struggles.

-Bill Peters

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06-04-26 1830ET