Lemons for Lulu, Barnes & Noble: Thursday’s IP Market Recap

by Kyle Woodley | December 1, 2011 5:03 pm

Lemons for Lulu, Barnes & Noble: Thursday’s IP Market Recap

IPMarketRecap Lemons for Lulu, Barnes & Noble: Thursdays IP Market Recap[1]Thursday saw a pair of contrasting stocks — old bricks-and-mortar bookseller Barnes & Noble (NYSE:BKS[2]) and cult retail stock Lululemon Athletica (NASDAQ:LULU[3]), the maker of fashionable yoga clothing — suffer similar fates on earnings reports.

BKS was nowhere near Wall Street earnings expectations of 3 cents per share when it reported fiscal second-quarter earnings Thursday, instead announcing a loss of $6.6 million, or 17 cents per share. However, the result was five cents per share better than the year-ago period.

Barnes & Noble has found itself in a costly battle to keep its Nook e-reader competitive with Amazon’s (NASDAQ:AMZN[4]) Kindle line. While Nook sales, which include content, were up 85% from last year, the company bemoaned costs associated with advertising the product.

Further exacerbating the problem was Amazon’s recent step up from a plain e-reader Kindle to the Kindle Fire, a more functional tablet closer to par with Apple’s (NASDAQ:AAPL[5]) iPad. In early November, Barnes & Noble joined the fray by announcing its own Nook tablet[6], which runs about $50 more than Amazon’s device and is slightly improved in some technical respects. That update also weighed on BKS’s profitability.

That news, as well as forecasts of full-year earnings hitting the lower end of Barnes & Noble’s previous $210 million-$250 million range, sent BKS tumbling as much as 25% before recovering to $14.59, or about 16% down from Wednesday’s close.

Lululemon Athletica, which has gripped investor interest with 1,000% gains in less than two years, had a decent earnings report but watched its shares plunge after missing lofty expectations. Wall Street analysts expected 34% year-over-year sales growth, but the company announced 31%, sending the stock down more than 5% to $47.17 by the end of Thursday’s trading.

The selloff seemed overdone considering the company announced a 50% gain in EPS, a 31% increase in revenue and 16% same-store sales growth. But hits like these aren’t uncommon among momentum stocks[7] — just look at Netflix (NASDAQ:NFLX[8]) and Green Mountain Coffee Roasters (NASDAQ:GMCR[9]).

Also Thursday, the airline industry continued to rebound from AMR Corp.’s (NYSE:AMR[10]) bankruptcy announcement[11], with big carriers like United Continental (NYSE:UAL[12], +6.4%, $19.12), Delta Air Lines (NYSE:DAL[13], +4.93%, $8.52) and US Airways (NYSE:LCC[14], +4.66%, $4.94) picking up ground.

Three Up

Three Down

As of this writing, Kyle Woodley did not hold a position in any of the aforementioned stocks. Check out our list of previous IP Market Recaps[21].

Endnotes:
  1. [Image]: http://investorplace.com/hot-topics/investorplace-market-recap/
  2. BKS: http://studio-5.financialcontent.com/investplace/quote?Symbol=BKS
  3. LULU: http://studio-5.financialcontent.com/investplace/quote?Symbol=LULU
  4. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  5. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  6. announcing its own Nook tablet: http://investorplace.com/2011/11/barnes-noble-bkn-nook-tablet-amazon-amzn-kindle-fire/
  7. among momentum stocks: http://investorplace.com/2011/12/lululemon-athletica-yet-another-momentum-stock-tailspin/
  8. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX
  9. GMCR: http://studio-5.financialcontent.com/investplace/quote?Symbol=GMCR
  10. AMR: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMR
  11. bankruptcy announcement: http://investorplace.com/2011/11/5-reasons-tom-horton-can-lead-amr-back-from-bankruptcy/
  12. UAL: http://studio-5.financialcontent.com/investplace/quote?Symbol=UAL
  13. DAL: http://studio-5.financialcontent.com/investplace/quote?Symbol=DAL
  14. LCC: http://studio-5.financialcontent.com/investplace/quote?Symbol=LCC
  15. GRPN: http://studio-5.financialcontent.com/investplace/quote?Symbol=GRPN
  16. CF: http://studio-5.financialcontent.com/investplace/quote?Symbol=CF
  17. JWN: http://studio-5.financialcontent.com/investplace/quote?Symbol=JWN
  18. KSS: http://studio-5.financialcontent.com/investplace/quote?Symbol=KSS
  19. EXPR: http://studio-5.financialcontent.com/investplace/quote?Symbol=EXPR
  20. SHLD: http://studio-5.financialcontent.com/investplace/quote?Symbol=SHLD
  21. IP Market Recaps: http://investorplace.com/hot-topics/investorplace-market-recap/

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