Wall Street Sours on Lululemon; Goldman Sachs Goes for the Resell; Krispy Gets Kreme’d by Wall Street

Soured…

Image courtesy of  Suat Eman/FreeDigitalPhotos.net

Image courtesy of Suat Eman/FreeDigitalPhotos.net

The mood is sour today at Lululemon Athletica as shares of the athletic apparel company tanked over 9%. Which is kind of weird since the company pulled in some rock-solid second quarter earnings. Revenue was up 16% to $453 million when analysts were only pulling for $446 million. Profits did fall to $47.7 million, earning 34 cents per share but it was still a beat, if even by just a penny. The problem was that Lulelemon’s outlook is not looking too hot, see-through yoga pants or not. For the current quarter, Wall Street had big hopes and dreams that the company would nail down earnings per share of around 43 cents. However, the number Lululemon has in mind is between 35 – 37 cents. And that’s got Wall Street thinking thoughts that are anything but…zen.  The problem is margins are shrinking because the company is spending all sorts of cash on things like its international expansion, building up its online presence and tackling its menswear. All this while Lululemon still attempts to recover from its see-through yoga pants debacle and some impolite comments from its founder, Chip Wilson.

Who wore it best?

Image courtesy of  Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Goldman Sachs just plunked down $81 million into six year-old San Francisco-based start-up thredUP. ThredUP, in case you were wondering, is an online website for buying and selling secondhand clothing and accessories for women and children. And it’s nothing like eBay. Because I know that’s what you were thinking. Instead thredUP sends sellers a pre-paid bag which they fill up with delicately used items they want to unload. If an item is priced south of $59.99, the seller gets paid upfront; if an item gets listed north of $60, then it qualifies for consignment. Sellers typically see 10%-40% of the anticipated selling price from their gently used items. While no actual sales numbers have been revealed, and thredUP has yet to churn out a profit, the company does process about a million items a month from about 25,000 brands. How much of that actually gets sold is still a mystery. Rumor has it, however, that secondhand clothing company Twice, which happens to be owned by eBay, isn’t doing so hot. Then there’s all the other secondhand competition from companies like Poshmark and The Real Real, to name but a few. ThredUP plans on using this funding infusion to expand by opening some new processing centers and hiring more employees. Who knew other people’s clothes was such a hot trend? Actually, I think eBay did. But anyways…

Kreme’d…

Image courtesy of artemisphoto/FreeDigitalPhotos.net

Image courtesy of artemisphoto/FreeDigitalPhotos.net

Krispy Kreme just released their earnings and they were anything but sweet. On revenues of $127.3 million, the company earned 15 cents per share, which seems pretty good except that Wall Street was counting on revenues of $132 million and 19 cents earned per share. That seems like an awful lot of pressure to put on a doughnut, no? The problem is that rival Dunkin’ Donuts actually gained 12%. Are Dunkin’s donuts any better? Hmmm. The problem, interestingly enough, lies not in the doughnut, but in the other products the company sells, outside of the doughnut shops. Pre-packaged Krispy Kreme products are not doing too hot in supermarkets and putting a crimp in the doughnut maker’s digits.  In fact, sales were down 12% and the stock is down 20% for the year.  So now, Krispy Kreme is going to focus on opening more stores, including international shops, and scaling back on promotions. There are even ten shops slated to open in Myanmar. That is not a joke. Myanmar. Who knew? One promotion that’s still going to happen is “Talk Like a Pirate Day” on September 19. Do your best pirate impersonation and you might just be the recipient of a free doughnut. If you decide to really channel Captain Jack Sparrow or one of his colleagues, expect to walk a way with a complimentary dozen, matey.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s