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    1476   TW0001476000

ECLAT TEXTILE CO., LTD.

(1476)
  Report
End-of-day quote Taiwan Stock Exchange  -  2022-10-04
408.00 TWD   +1.12%
08/04Eclat Textile Co., Ltd. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2022
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08/04Eclat Textile : The board of directors of the Company approves removal of the non-compete clause for managerial personnel
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08/04Eclat Textile : To announce the new appointment of Vice Chairman
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Lululemon shares tank after firm pulls see-through pants

03/19/2013 | 01:12pm EDT
File photo of a sign at retail clothing store Lululemon Athletica in San Francisco

TORONTO/HONG KONG (Reuters) - Shares of Lululemon Athletica Inc slid on Tuesday after the trendy retailer said it was recalling batches of pants that it said were too transparent, an embarrassment that raised fresh questions about whether it could sustain its stellar growth.

Lululemon said late on Monday it was pulling about 17 percent of the women's pants on its store shelves because the products - black pants made with its signature stretchy "Luon" fabric - fell short of technical specifications. It warned that the recall of the see-through pants would have a significant impact on its financial results.

The recall, the second quality issue disclosed in less than a year, could undermine Lululemon's reputation, analysts said, especially at a time when competition from lower-priced brands is heating up. Last July, the company acknowledged problems with dye-bleeding in some of its apparel.

"Those are two black eyes for a brand that is supposed to stand for quality in the marketplace," said Brian Sozzi, chief equities analyst at NBG Productions. "It's a window of opportunity for Lululemon competitors."

Sales growth in established stores is now expected to come in at 5 percent to 8 percent for the current quarter, compared with the 11 percent it had expected up to March 17. That's a far cry from the 25 percent growth it posted a year earlier.

The supplier, Taiwan's Eclat Textile Co Ltd, said it had followed Lulu's specs, and that the retailer had apparently misjudged customer tastes.

Lululemon, which is due to report earnings for its fiscal fourth quarter to February 3 on Thursday, had no immediate comment beyond its statement late Monday.

REPUTATION FOR QUALITY

Shares of Lululemon were down 4.4 percent at C$64.50 on the Toronto Stock Exchange on Tuesday as analysts trimmed their expectations.

With the recalled products off the market, Sozzi said, customers will be tempted to check out similar offerings from Nike Inc and Gap Inc's Athleta banner.

Sterne Agee analyst Sam Poser downgraded the stock to "neutral" from "buy," advising clients to "wait and see" while the problem is resolved. The company has not said when it would have the affected products in stock.

"The potential problem you have is that if the customer walks in and can't find that pant, and she can't find it for six weeks, she might end up saying: 'Oh, well, I'll try Under Armour, or I'll try Nike, or I'll try whomever,'" said Poser.

Lululemon has carved out a profitable niche selling fashionable, pricey workout gear to women. One of very few Canadian retailers to succeed in the United States, the chain is expanding in Europe and Asia over the next two years, and it has small but growing lines for men and girls.

Investors are split on whether Lulu's rapid growth can keep pace with lofty expectations as more competitors, such as Athleta, muscle into its territory, offering similar gear at lower prices.

"DO A COUPLE OF DOWN DOGS"

Customers may find that some Lululemon products still on sale are partially transparent as well.

"You may experience sheerness with some of our bright-colored bottoms because of the lightweight nature of the fabric," says a disclaimer on some product pages on the company's website.

"We recommend you do a couple of Down Dogs in your bright-colored bottoms to ensure you're happy with the fit and coverage," the page reads, referring to a basic yoga position.

Eclat, a longstanding Lululemon supplier that manufactures Luon, told Reuters that "a gap between Lululemon's expectations and reaction from the market" was the cause of the problem.

"We checked our orders this morning and indeed, we did follow their instructions to make the product," said Roger Lo, a spokesperson at Eclat. "Lulu has some new ideas every year, such as taking different approaches for fashion-related purposes."

Shares of Eclat fell 1.6 percent in Taipei on Tuesday, lagging a 0.4 percent gain in the benchmark TAIEX index.

In its annual report in March 2012, Lululemon said it was at risk of overly relying on a limited number of suppliers. The company said Luon was supplied by a single manufacturer in Taiwan.

Still, it was not immediately clear whether Eclat manufactured all of the fabric that prompted the recall, or if another manufacturer was also involved.

CUTS SALES FORECAST

Several analysts cut price targets and earnings expectations for the company.

Janney Capital Markets analyst Adrienne Tennant trimmed her price target to $71 from $80, and was cutting her earnings expectations to "give management breathing room to properly address and fix the issue."

Lululemon said it now expected to report fiscal first-quarter sales of $333 million to $343 million, down from its prior forecast of $350 million to $355 million.

The company is trying to determine the impact on first-quarter earnings, as well as the expected impact on results for the rest of 2013.

The warnings prompted price target cuts on Lululemon's stock from Wedbush Securities, KeyBanc, UBS, Sterne Agee, Canaccord Genuity and other brokerages on Tuesday.

International Strategy and Investment Group analyst Sam Lee said in a note to clients that Lululemon's woes are due to teething issues in an immature supply chain.

"We would really like to see the company more aggressively invest in and exercise greater control over its supply chain given the importance of quality and consistent fit to the Lulu brand promise," said Lee. He added that the pullback in Lulu's stock still presented a buying opportunity.

(Editing by Frank McGurty and Andrew Hay)

By Allison Martell and Yimou Lee


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
ECLAT TEXTILE CO., LTD. 1.12% 408 End-of-day quote.-35.34%
MSCI TAIWAN (STRD) 3.00% 479.689 Real-time Quote.-38.94%
NIKE, INC. 2.78% 91.1 Delayed Quote.-46.82%
THE GAP, INC. 5.19% 9.72 Delayed Quote.-51.22%
UNDER ARMOUR, INC. 1.08% 7.48 Delayed Quote.-66.82%
All news about ECLAT TEXTILE CO., LTD.
08/04Eclat Textile Co., Ltd. Reports Earnings Results for the Second Quarter and Six Months ..
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08/04Eclat Textile : The board of directors of the Company approves removal of the non-compete ..
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08/04Eclat Textile : To announce the new appointment of Vice Chairman
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08/04Eclat Textile : Board of Directors approved the 2022Q2 consolidated financial statements
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08/04Eclat Textile Co., Ltd. Announces Appointment of Shu-Wen Wang as Vice Chairman
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08/02Eclat Textile : is invited to attend Investor Conference held by SinoPac Securities
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06/15Eclat Textile : Announcement of the ex-dividend record date in 2022
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06/14Eclat Textile : Announcement of the important resolutions of 2022 Annual General Sharehold..
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06/13Eclat Textile : Clarification of mass media reporting on Jun 13, 2022
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05/06Eclat Textile Co., Ltd. Reports Earnings Results for the First Quarter Ended March 31, ..
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Financials
Sales 2022 42 685 M 1 349 M 1 349 M
Net income 2022 7 194 M 227 M 227 M
Net cash 2022 1 382 M 43,7 M 43,7 M
P/E ratio 2022 15,6x
Yield 2022 4,00%
Capitalization 112 B 3 537 M 3 537 M
EV / Sales 2022 2,59x
EV / Sales 2023 2,52x
Nbr of Employees -
Free-Float 69,7%
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Technical analysis trends ECLAT TEXTILE CO., LTD.
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TrendsBearishBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 16
Last Close Price 408,00 TWD
Average target price 476,00 TWD
Spread / Average Target 16,7%
EPS Revisions
Managers and Directors
Chun Chin Tsai Co-General Manager & President-Fabric Division
Kun Tang Chen Co-General Manager & Director
Jen Chieh Lo Director, Head-Finance & Accounting
Chen Hai Hung Chairman, Head-Research & Development
Cheng Ping Yu Independent Director
Sector and Competitors
1st jan.Capi. (M$)
ECLAT TEXTILE CO., LTD.-35.34%3 497
LVMH MOËT HENNESSY LOUIS VUITTON SE-11.03%323 642
LULULEMON ATHLETICA INC.-21.37%39 246
LI NING COMPANY LIMITED-29.12%20 154
VF CORPORATION-57.28%12 339
MONCLER S.P.A.-28.48%12 268