Lululemon Falls on Cautious Outlook, Challenges in US Market

Lululemon Falls on Cautious Outlook, Challenges in US Market

Lululemon Athletica Inc. said visits to US stores slowed at the beginning of the year, leading to a lower-than-expected sales outlook for the first quarter and full year. The shares fell in extended trading.

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(Bloomberg) — Lululemon Athletica Inc. said visits to US stores slowed at the beginning of the year, leading to a lower-than-expected sales outlook for the first quarter and full year. The shares fell in extended trading.

Shoppers at US stores also bought slightly less than a year earlier, Chief Executive Officer Calvin McDonald told analysts during a conference call on Thursday. American consumers “are a little soft coming into the year,” he added. By contrast, “all international markets, including Canada, are continuing their strong momentum.” 

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Lululemon sees revenue in the current fiscal year in a range of $10.7 billion to $10.8 billion, according to a statement. That would represent growth of 11% to 12%, which is well below the 19% it posted the previous year. The upper limit is also below analysts’ average estimate.

The shares fell 11% at 5:57 p.m. in late New York trading. The stock has slipped 6.3% so far this year through Thursday’s close, compared to a 9.9% gain for the S&P 500 Index. 

The company has had a stellar post-pandemic run and continues to post robust results. Lululemon’s ongoing double-digit sales growth compares with declines at many US apparel companies. Additionally, the yogawear maker typically guides conservatively — and then beats those forecasts, leading investors to anticipate better-than-forecast results.

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“They will beat their conservatively-set guidance,” Bloomberg Intelligence analyst Poonam Goyal said. “Plenty of opportunity exists — especially abroad and in men’s.” 

The US traffic slowdown has been across the board, the company said, and wasn’t particular to a specific category. To attract more shoppers, McDonald said Lululemon will be rolling out products in new colors as well as more items in the 0 to 4 size range. 

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See also: Lululemon earnings snapshot

Products for men grew 15% in the fourth quarter, which ended in late January, outpacing 13% for women’s apparel. Accessories, meanwhile, surged 40% in the period. The Vancouver-based company expects to open 35 to 40 new stores this year, mainly in China. 

International net revenue jumped 54% while sales in the Americas increased a more modest 12%. Lululemon expects to generate net revenue of $12.5 billion by 2026, driven in part by a plan to bolster e-commerce, international sales and sales of men’s apparel. 

The activewear company is focusing on expansion in China in particular as competition rises in the US and competition ramps up with brands such as Alo Yoga and Vuori. It’s also expanding its offering of accessories, footwear and men’s apparel to complement its robust sales of women’s leggings and other sportswear.

(Updates shares)

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