Lululemon Shares Plunge 15% on Revenue Miss and Slashed Guidance
Lululemon Athletica Inc. shares dropped over 15% in after-hours trading following disappointing quarterly results. The company reported revenue of $2.53 billion, slightly below expectations, but beat EPS estimates with $3.10. Lululemon significantly reduced its full-year guidance, lowering revenue projections to $10.85-$11 billion from $11.15-$11.3 billion, and EPS to $12.77-$12.97 from $14.58-$14.78. The company expects a $240 million impact on gross profit due to tariffs, particularly from the removal of the de minimis exemption on parcels under $800. CEO Calvin McDonald noted growing consumer fatigue, especially among high-value customers. Lululemon has implemented price increases and cost management measures, including laying off 150 corporate employees in June.
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Lululemon Athletica Inc., the popular athletic apparel retailer, saw its shares tumble over 15% in after-hours trading following the release of its quarterly results that fell short of expectations for the third consecutive quarter. The company's financial performance and revised outlook have raised concerns among investors about its growth trajectory and ability to navigate current market challenges.
Quarterly Results Miss the Mark
Lululemon reported revenue of $2.53 billion for the quarter, slightly below the anticipated $2.54 billion. However, the company managed to outperform on earnings per share (EPS), posting $3.10 against an expected $2.88.
Guidance Cut Raises Eyebrows
In a move that further rattled investors, Lululemon significantly reduced its full-year guidance:
| Metric | Previous Guidance | Revised Guidance |
|---|---|---|
| Revenue | $11.15-$11.3 billion | $10.85-$11 billion |
| EPS | $14.58-$14.78 | $12.77-$12.97 |
This substantial downward revision in both revenue and earnings projections suggests the company is facing headwinds that could impact its performance more severely than initially anticipated.
Tariff Impact and Consumer Fatigue
Lululemon expects to take a significant hit to its gross profit, estimating a $240 million impact due to tariffs. This is particularly attributed to the removal of the de minimis exemption on parcels under $800, which is likely to affect the company's e-commerce operations and cross-border sales.
CEO Calvin McDonald acknowledged growing consumer fatigue, especially among high-value customers. This fatigue, coupled with increasing competition from rivals like Alo Yoga and Vuori, is putting pressure on Lululemon's market position.
Strategic Responses
To address these challenges, Lululemon has implemented several strategic measures:
- Price Increases: The company has raised prices on some of its products to help offset rising costs.
- Cost Management: In June, Lululemon laid off 150 corporate employees as part of its efforts to manage expenses.
Market Reaction
The disappointing results and outlook have taken a toll on Lululemon's stock performance. Following this report, the company's shares have experienced a significant decline, reflecting investor concerns about its ability to maintain its growth momentum in an increasingly competitive and challenging market environment.
As Lululemon navigates these turbulent waters, investors and analysts will be closely watching how the company adapts its strategies to regain momentum and address the challenges in the athletic apparel market.
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