Lululemon shares down on sales trends

Lululemon Athletica Inc.'s shares sank Tuesday after the yoga-clothing company forecast fourth-quarter revenue that fell short of market expectations.

THE SPARK: The company said late Monday that it expects to earn 74 cents per share for the fourth quarter, up from its prior forecast of earnings between 71 to 73 cents per share. It said its revenue would come in at the high end of its $475 million to $480 million guidance range. Analysts polled by FactSet forecast earnings of 74 cents per share on revenue of $489 million.

Lululemon said it expects revenue from its stores open at least a year will increase in high single digits, on a percentage basis. This is considered a key indicator of financial performance as it strips away the impact of recently opened or closed stores.

THE BIG PICTURE: Lululemon has reported gains in revenue and profit for some time. That has sent its stock price soaring but investors appear to be concerned that the rate of growth is slowing.

THE ANALYSIS: Stifel Nicolaus analyst Jim Duffy found management's comments on improving margins and inventory levels were encouraging.

The analyst said that its sales from establish stores disappointed investors as they've grown used to the company beating expectations. The forecast of this measure failed to excite investors and there were few details provided.

Duffy said that the company may provide some insight on the expectations for the coming year at a conference on Wednesday.

The analyst said that while he too was disappointed by the quarter's key sales measure, he still finds the company's growth opportunities compelling and stood by his buy rating on its shares and a price target of $83.

SHARE ACTION: Shares fell $2.96, or 4.1 percent, to $69.34 by late afternoon.

The company's stock has been steadily climbing since 2009. So even with the day's decline it remains well in the middle of its 52-week trading range of $52.20 to $81.09.