The economy has come for Lululemon Athletica Inc.
While the active powerhouse seemed able to float above such prosaic concerns year after year, it is now subject to gravity again.
There were signs that was starting to happen last year, when the brand stumbled by failing to offer enough newness in its assortment. Now — while fourth-quarter earnings topped estimates and product innovation has been revived — the company forecast that growth this year would be weaker than analysts expected.
That was reflected on Wall Street, where investors sent shares of the company down 6.2 percent to $320.40 in after-hours trading.
On a call with analysts, chief executive officer Calvin McDonald pointed to a survey showing that concerns about inflation and the economy are causing shoppers to spend less.
Calvin McDonald
Jeff Fried/WWD/Shutterstock
“We are operating within a dynamic macro environment that’s really contributed to a consumer where we’ve seen material impact to traffic across the industry,” McDonald said. “While we’ve experienced some of these traffic trends…the guests coming in are responding to the newness, they’re buying more and it’s having an impact. So those are very good indicators.”
He said the U.S. business started out with “a fantastic rhythm and cadence of very unique community-based activations” and that shoppers like the product.
“We’re controlling and focused on what we can control,” McDonald said. “I think we’re well positioned as these macro challenges soften moving forward.”
The CEO said sales growth in North America would be “modest.” The company is looking for a low- to mid-single-digit increase in the region, with the U.S. as the lower end and Canada at the higher end.
For the fourth quarter, net income grew 11.8 percent to $748.4 million, or $6.14 a diluted share, putting earnings 27 cents ahead of the $5.87 Wall Street analysts forecast, according to Yahoo Finance.
Revenues for the three months ended Feb. 2 rose 13 percent to $3.6 billion — an 8 percent increase after subtracting an extra week in the year-ago quarter.
Comparable sales increased 3 percent with a flat performance in the Americas and a 20 percent jump in the rest of the world.
For this year, Lululemon forecast earnings of $14.95 to $15.15 a share — short of the $15.40 analysts had penciled in. Sales for the year were projected to rise 5 to 7 percent to $11.2 billion to $11.3 billion, just below the $11.31 billion analysts forecast.
Lululemon expects to grow its square footage by 10 percent this year as it continues on its plans to double its business, from $6.25 billion in 2021 to $12.5 billion by 2026.
