NEW YORK -- Yoga wear maker Lululemon Athletica is reporting fourth-quarter results that beat Wall Street expectations.
But the Canadian company said Thursday that its decision this week to pull its popular black yoga pants off the shelves because the fabric showed off too much of their wearers will dent their financial results for this year.
"The only way to test for the problem is to put the pants on and bend over," Lululemon CEO Christine Day said on an earnings call, according to the Wall Street Journal . "It wasn't till we got it in store and started putting it on people that we actually saw the issue."
On Monday, Lululemon announced that it pulled the pants from its stores and online after it found out that the fabric used to make them was too sheer.
Its results for the fourth quarter – which covered a period that had ended before it stopped selling the pants – topped analysts' estimates. Its shares rose 67 cents to $64.55 in premarket trading Thursday.
Lululemon Athletica Inc. said that it foresees first-quarter earnings between 28 cents and 30 cents per share. It reported earnings of 32 cents per share a year ago. The company expects the recall will pull its earnings down by 11 cents to 12 cents per share.
Analysts polled by FactSet expect earnings of 39 cents per share.
The retailer also reiterated some of the updated first-quarter forecasts it gave on Monday. This includes expectations for first-quarter revenue between $333 million and $343 million, down from an earlier estimate of $350 million to $355 million. Analysts had previously forecast revenue of $352.1 million.
Lululemon also maintained that first-quarter revenue at stores open at least a year is now expected to rise between 5 percent and 8 percent. The company previously predicted an 11 percent increase. This figure is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.
Lululemon provided fiscal 2013 guidance, saying it anticipates earnings between $1.95 and $1.99 per share on revenue in a range of $1.62 billion to $1.64 billion.
Wall Street predicts earnings of $2.16 per share on revenue of $1.68 billion.
The company's see-through black Luon pants is the latest in a series of quality glitches that threatens to alienate the retailer's hardcore fan base, which has so far been more than willing to shell out $100 for pants and other athletic garments. These legions of followers have helped Lululemon, founded in 1998, become a billion-dollar business.
Lululemon insists that the problem with the Luon pants didn't occur because it changed specifications for the clothing or switched suppliers. It warned that taking the pants off the shelves could lead to short supplies.
The Luon pants, made from a combination of nylon and Lycra fibers, are one of the retailer's product staples and account for about 17 percent of all women's pants in its stores. The company is offering customers' full refunds or exchanges.
On Thursday Lululemon reported that its fourth-quarter net income rose 49 percent to $109.4 million, or 75 cents per share, from $73.5 million, or 51 cents per share, a year ago.
Analysts forecast earnings of 74 cents per share.
Revenue for the period ended Feb. 3 climbed 31 percent to $485.5 million from $371.5 million. Wall Street expected $482.2 million in revenue.
Revenue at stores open at least a year rose 10 percent.
For the year, Lululemon earned $270.6 million, or $1.85 per share. That compares with $184.1 million, or $1.27 per share, in the prior year.
Annual revenue increased 37 percent to $1.37 billion from $1 billion.
Revenue at stores open at least a year climbed 16 percent.
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