Lululemon shares sink on disappointing outlook, slowdown in U.S. business

Shares in Lululemon Athletica Inc. were down about 15 per cent in afternoon trading Friday as investors reacted to lower revenue projections and a U.S. slowdown.

The Vancouver-based athletic apparel retailer’s fourth quarter, which ended Jan. 28, brought US$669.5 million in earnings, up from US$119.8 million a year earlier.

However, the company estimates its fiscal 2024 revenue will range between US$10.70 billion and US$10.80 billion. Analysts on average had expected US$10.90 billion, financial markets data firm Refinitiv said.

The projections came as Lululemon chief executive Calvin McDonald lamented a sluggish U.S. market.

“As you’ve heard from others in our industry, there has been a shift in the U.S. consumer behaviour of late, and we’re navigating what has been a slower start to the year in this market,” he told analysts Thursday.

The retailer also noticed an increase in younger shoppers, which necessitate smaller sizes and a wider selection of colours that weren’t always on hand.

“Sizes zero to four is something we’re chasing into. Colour, where we had colour, it performed well, but honestly, we just did not have enough,” McDonald said.

John Kernan, an analyst with TD Cowen, suspected rivals were making the sector “as challenging as ever” for Lululemon, too. “U.S. consumer softness could partially be attributed to increased competition from upstarts Alo and Vuori,” he told investors in a note.

Alo is a Los Angeles-based purveyor of yoga apparel and other athleticwear that has pushed more aggressively into the Canadian market recently. Vuori, from San Diego, Calif., also makes clothing suited to recreation.