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Lululemon Turnaround Stalls as Margins Slip

Lululemon Athletica Inc. (NASDAQ: LULU) reported third-quarter 2015 results before markets opened Wednesday. The yoga gear maker posted adjusted diluted earnings per share (EPS) of $0.35 on revenues of $479.7 million, compared with diluted EPS of $0.42 on revenues of $419.4 million in the same period a year ago. The consensus estimates called for EPS of $0.37 on revenues of $482.13 million.

On a GAAP basis, excluding tax- and interest-related adjustments, the company posted EPS of $0.38.

Total comparable sales, including direct sales to consumers, increased by 9% year over year on a constant dollar basis. Same-store sales rose 6% and direct-to-consumer sales rose 21%, also on a constant dollar basis. Direct-to-consumer sales now make up 18.6% of Lululemon’s total sales, up from 18.4% in the same period last year.

Gross profit fell from 50.3% in the year-ago quarter to 46.9% in the third...