Lululemon Athletica Inc. saw its shares slide more than 8% in after-hours trading on the Nasdaq on Thursday after the Canadian yoga-wear retailer cut its full-year revenue and profit guidance, citing a slower-than-expected start to the holiday season and ongoing challenges in the North American market.
The company now expects full-year revenue in the range of $10.4bn to $10.5bn (£8.3bn to £8.4bn), down from its previous forecast of $10.7bn to $10.8bn. Adjusted diluted earnings per share are projected at between $13.95 and $14.15, well below the consensus analyst estimate of $14.65. The news sent the stock tumbling to around $380 in extended trading, wiping out earlier gains made during the regular session.
Chief Executive Calvin McDonald said the company is seeing 'softer traffic trends' in its core North American business, particularly among women's apparel, which accounts for the majority of sales. The warning comes despite a strong third-quarter performance, where revenue rose 9% year-on-year to $2.4bn and net income increased 17% to $351.6m. International sales, particularly in China, continued to grow at a double-digit pace, but not enough to offset the domestic slowdown.
For UK investors and pension holders with exposure to US equities or global retail funds, the downgrade is a cautionary signal. Lululemon is widely held in exchange-traded funds tracking the consumer discretionary sector, such as the iShares US Consumer Discretionary ETF. The stock's decline dragged down the broader sector in after-hours trading, with rivals Nike and Under Armour also edging lower. Analysts at Wedbush Securities noted that the guidance cut 'raises questions about the resilience of premium athleisure spending heading into 2025,' particularly as inflation continues to squeeze household budgets.
The FTSE 100 closed flat on Thursday, but the Lululemon news could weigh on sentiment for UK-listed retailers such as JD Sports Fashion and Next when London markets open on Friday. The broader implications for the global retail sector are significant: if a brand with Lululemon's cachet is struggling to maintain momentum, it may signal that consumers are trading down or deferring discretionary purchases. Source: Lululemon Athletica Q3 2024 earnings release.