Summary:
The shares of the Vancouver-based yoga and running wear retailer, Lululemon Athletica, fell 6% after a retailer said this quarter left it lean on inventory for the current period. Their profit almost doubled in the fourth quarter to $55-million while revenue rose 53% to $245.4-million. Their issue with inventory has left retailers very constrained within the first half of the year. Although this problem could be complicated, it is seen as a short-term issue and it will not affect basic items since sales are strong. It is more of if they ordered enough of the new. Lululemon Athletica’s profit for 2010 fiscal year doubled compared with a year ago. They also plan to open six new North American stores this quarter and are working on boosting its international presence.
Connection:
For Lululemon Athletica’s indirect cash flow statement, their first account would be the net income and they would record a net income of $55-million. They had a revenue growth of 53% or $245.4million. They had earnings of $55million (76¢) per share compared to $28.5million (40¢) a year ago, beating analyst expectations. Although their profit has almost doubled in Q4 to $55million, their inventory issue which happened before during a surprising and quick post-recession recovery will probably leave retailers very inventory constrained throughout the first 6 months of the year. This will affect the whole company because they will need to prepare for the next quarter and think about putting more money in their inventory, which will make them have a lower cash flow. Since they plan to improve shipping for its international markets and they plan to open 6 new stores in North America, their cash flow will also decrease. They might not be doing so well right now so maybe that's why they've decided to decrease their investments.
Reflection:
In the last 12 months, this company's stock price has more than doubled, making it to the top. It has been one of the hottest things in the yoga world and people are really craving it. This company also has 137 stores in both North America and Australia. Recently in March, Lululemon Athletica breaks to a new all-time high and they also announced a two for one stock split. This company went public at an unsuitable time in the middle of 2007, where they struggled with financial crisis, but luckily this company has thrived during the recovery. Even though they are currently having some problems with inventory, their strong sales will continue to keep them up. Also, since so many people want the new, they could probably cut back on advertisements and spend that money on inventory instead.
