Lululemon shares plunge as pullback expected on 4Q purchases

Lululemon Athletica Inc. reported strong revenue and sales for the third quarter of 2022, but its shares plunged Friday morning after the retailer offered softer-than-expected guidance for the rest of the year as shoppers curb spending amid high inflation.

Calvin Mcdonald, chief executive of the Canadian athletic apparel retailer, touted this year's Black Friday as the company's “biggest day ever in our history in terms of revenue and traffic,” but the company anticipates the next quarter's net revenue to be in the range of $2.605 billion to $2.655 billion, as opposed to the previously projected $2.649 billion.

“We're pleased with the start of the holiday season, however, the environment remains dynamic and we still have approximately two-thirds of the quarter ahead of us,” chief financial officer Meghan Frank told investors during Thursday's earnings call.

The company said diluted earnings are expected to be between $4.20 to $4.30 per share for the fourth quarter, compared to estimates of $4.30.

The forecast for net revenue for the full year, however, was raised to $7.944 billion to $7.994 billion — up from the previously expected range of $7.865 billion to $7.940 billion.

Mcdonald said the retailer continues to see improvements across its supply chain, a positive turn from previous quarters' inventory woes. Back in June, the CEO said global supply chain issues remained a challenge for them, adding that inflation has increased input costs in resources, labour and air freight at the time.

“Our factories have now returned to pre-pandemic levels of production efficiency,” he said Thursday, adding that the prior year's levels were “too lean,” thus the company's decision to to build inventories this year.

In early October, Lululemon launched its new membership program with two tiers — a free “essential” tier and the premium tier, Lululemon Studio. The subscription-based platform offers on-demand and livestreamed classes, resulting from the company's acquisition of interactive exercise screens maker Mirror in a move toward in-home fitness as demand surged during COVID -19 lockdowns.

Shares of Lululemon were trading down more than 12 per cent at US$326.89 Friday morning in New York.