Lululemon's forecast too low for big players

Yogawear maker Lululemon Athletica Inc. revised its guidance for the current quarter but failed to impress investors who expected better.

The Vancouver-based company said Monday it sees sales growth in the high teens for the period ending Jan. 31, at the high end of its Dec. 10 guidance. Growth in adjusted diluted earnings per share will “be at the high end of its mid-single digits expectation,” the company said.

That wasn't enough to some investors, who've become used to Lululemon beating expectations. The shares dropped in premarket trading but by midmoring were up almost two per cent before sliding back in the afternoon in New York trading. They ended the day at US$361.66, down 1.04 per cent.

“We're pleased with the momentum over the holiday period,” chief executive Calvin McDonald said.

Some were expecting a bigger boost. Paul Trussell, from Deutsche Bank, said last week he was anticipating a new sales forecast in the low-20 per cent range. So did Jim Duffy at Stifel, who in a Jan. 5 note said that low-20s growth would be the “positive/negative break point on share reaction.”

The company took an early hit from the coronavirus when it was forced to temporarily close stores in China last February. But Lululemon, which is known for its yoga pants and exercise outfits, benefited from the rush to casual clothes during the pandemic as millions began working from home.

But virus-related restrictions and a second wave of closures in some regions have hurt productivity at its brick-and-mortar stores, which a boom in e-commerce only partly made up for.