Lululemon (LULU)

Although Lululemon's core customers are relatively unaffected by downturns in the economy, an economic recession reduces the spending power of many of the company's "fringe" customers that may purchase occassional items, and thus may hurt the company's growth in sales.

The Company reported Q1 ( 2008 ) results.

Earnings came in line with expectations at $0.12 per share, up from $0.05 last year and revenues increased by 75% to $78.2 million, with same-store sales up 28%. Gross margin increased 260 basis points to 53.1%, up from 50.5% last year.

While earnings came in line with expectations, the Street didn’t appear to like what they saw from the company’s outlook. With the company seeing same-store sales increasing in the low teens and expecting to open 35 new stores in fiscal 2008 AND the Company raised its revenue guidance from $370-$375 million to $380-385 million.

Forecast :

Despite the higher revenues, the company now sees fiscal 2008 earnings of $0.68- 0.71 per share, down slightly from its prior $0.70-0.72 per share. The reduction in earnings forecast was being driven by a higher level of strategic investment. The company’s long-term growth rate was maintained, with revenue growth of 25% and EPS growth in excess of 25%.