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

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

[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

• Groupon (NASDAQ:GRPN[15]): Up 8.29% ($1.45) to $18.95.
• CF Industries (NYSE:CF[16]): Up 5.14% ($7.18) to $146.98.
• Nordstrom (NYSE:JWN[17]): Up 4.02% ($1.82) to $47.10.

Three Down

• Kohl’s (NYSE:KSS[18]): Down 6.38% ($3.43) to $50.37.
• Express (NASDAQ:EXPR[19]): Down 6.21% ($1.41) to $21.28.
• Sears Holdings (NASDAQ:SHLD[20]): Down 4.72% ($2.85) to $57.48.

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].

Source URL: https://investorplace.com/2011/12/lululemon-lulu-barnes-noble-bks-market-summary/

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