Lululemon Athletica’s stock fell about 15% Friday afternoon as markets reacted to the company’s financial results released the day before.
On Thursday, the Vancouver-headquartered clothing company announced that it generated a profit of US669.5 million in its fourth quarter, compared to US119.8 million for the same period a year earlier.
However, the company estimates its revenue for fiscal 2024 to be between US$10.70 billion and US$10.80 billion. Analysts on average expected US$10.90 billion, according to financial markets data firm Refinitiv.
The forecasts came as Lululemon CEO Calvin McDonald lamented the weakness of the U.S. market.
“As others in our industry have told you, there has been a shift in U.S. consumer behavior recently, and we are having a slower start to the year in this market,” he said. he confessed to analysts during a conference call held Thursday.
The retailer has also noticed an increase in younger consumers, who require smaller sizes and covet a greater selection of colors that were not always available in stores.
“For sizes zero to four, we are a little behind. As for color, it worked well where we had it, but honestly, we just didn’t have enough,” McDonald admitted.
John Kernan, analyst at TD Cowen, also suspects that competition is causing Lululemon to operate in a “more difficult than ever” context.
“The decrease in demand observed (by Lululemon) in the United States could in part be attributable to the arrival of new players on the market, such as Alo and Vuori,” he said in a note to investors.
Alo, an American yoga and other activewear company, has recently made a more fierce push into the Canadian market. Vuori, another American company, also makes clothing suitable for leisure. Rumor has it that it might be tempted to go public this year.
Mr. McDonald, however, maintained that Lululemon’s performance has been strong, even amid increased competition.
The company focused on innovation, with varied fits and fabrics, and added men’s clothing and shoes to its product portfolio. It aims to offer products for customers of all ages.
“A girl, her mother and her grandmother can shop with us and recommend our different products to each other,” he emphasized.
“When I look at the list of our competitors, I don’t see anyone who compares to this offer,” he maintained.
Room for expansion
This year, Lululemon plans to add 35 to 40 net new company-operated stores, several of which will be located in markets outside of North America.
“Our brand awareness remains low in most markets, which represents a significant opportunity for us to attract new customers,” said Mr. McDonald.
Lorraine Hutchinson, an analyst at BofA Global Research, believes that Lululemon’s problems in the United States will soon be resolved by its expansion efforts and advancements in its product offerings.
In early February, the company launched its first men’s shoe collection, which was well received in North America and China. Its new golf products are also expected to boost sales, she noted.
Women will also see new fabrics used in yoga and workout clothing, while new silhouettes will appear in the company’s Align line.
“Lululemon stands out thanks to a varied offering of fabrics, categories and innovative styles,” recalled Mme Hutchinson in a note to investors.