Lululemon Athletica Inc. shares dropped after the yogawear brand delivered a disappointing outlook for the year ahead amid slower U.S. sales.
The retailer expects fiscal year sales to be in the range of US$11.15 billion to $11.3 billion, lower than Wall Street analysts anticipated. The outlook for first-quarter revenue also missed expectations.
The stock fell 11 per cent in extended trading at 5:05 p.m. New York time. If that decline holds, the stock will be set for its biggest drop in a year. The stock had fallen 11 per cent this year through Thursday’s close.
Chief Executive Officer Calvin McDonald is working to lift demand by expanding the product assortment and entering new categories, adding gear for sports like golf, tennis and running. The company has been contending with fluctuating fashion trends, trying to adapt to shoppers that prefer looser clothes rather than the form-fitting clothes that are the brand’s hallmark.
McDonald said macroeconomic concerns have kept shoppers away from stores. The Vancouver-based company is facing worries about consumer spending in the U.S. and supply chain costs amid an escalating trade war between President Donald Trump and countries around the world. Lululemon has most of its goods manufactured in Asia, including in Vietnam, Cambodia and Sri Lanka, according to regulatory filings.
“We are operating within a dynamic macro environment that’s really contributed to a cautious consumer where we’ve seen material impact to traffic across the industry,” McDonald said on a conference call with analysts.
McDonald laid out a long-term strategic plan three years ago that called for doubling sales to $12.5 billion by 2026. The company is sticking by that target for next year, but increased competition has slowed growth, especially in North America.
The overseas business has performed better. In the fourth quarter that ended Feb. 2, comparable international sales rose 22 per cent. By comparison, the Americas business was flat.
China is a critical growth engine for Lululemon, with revenue up 39 per cent in the quarter even as consumers in the market pull back amid a post-Covid economic slowdown. The brand became the third-largest foreign sports apparel label in the market last year, according to Morgan Stanley.
Kim Bhasin, Bloomberg News
