Lululemon’s Sales Growth is Slowing Ahead of the Holidays

Lululemon Athletica Inc.’s fourth-quarter income steerage trailed Wall Avenue estimates, a uncommon miss for the retailer whose efficiency routinely exceeds investor expectations.

Gross sales development on the activewear firm, whereas nonetheless strong in contrast with most friends, is slowing as higher-income customers spend extra on issues like journey and leisure moderately than attire. Lululemon mentioned Thursday that income within the vacation quarter is anticipated to be up 13 p.c to 14 p.c over final yr, down from 19 p.c development seen within the three-month interval that simply ended.

On a name with analysts, CFO Meghan Frank mentioned the corporate was happy with its Thanksgiving weekend gross sales however it’s “being prudent with the planning” for the rest of the quarter, which ends in late January.

The shares fell 2.3 p.c at 5:04 PM in late New York buying and selling. The inventory’s sturdy efficiency this yr — greater than double the acquire of the S&P 500 Index — has elevated strain for the corporate to maintain up its tempo of development.

“It’s essential to notice that the present value has reached an all-time excessive, accompanied by exceptionally elevated investor expectations,” Jessica Ramírez, an analyst at Jane Hali & Associates, wrote in a be aware forward of Lululemon’s earnings. “This example implies that any misstep in even a single side might doubtlessly restrict upside within the very close to time period.”

From its roots as a yogawear firm, Lululemon has enticed customers globally with leggings and different sportswear that promote at a premium value. Along with loyalty within the US and Canada, the place it’s based mostly, the corporate has honed its development technique outdoors North America, the place income rose 49 p.c within the third quarter.

The retailer forecast fourth-quarter income within the vary of $3.14 billion to $3.17 billion, whereas analysts surveyed by Bloomberg have been searching for $3.18 billion, on common.

Within the third quarter, adjusted earnings per share got here in higher than anticipated whereas working margin and gross margin missed Wall Avenue estimates. Lululemon recognised $72.1 million in costs within the quarter associated to Mirror, the health product it plans to discontinue after inking a partnership with Peloton Interactive Inc. in September.

By Olivia Rockeman

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