Lululemon Shares Tumble After Forecast Disappoints Investorsby
Foot-traffic trends heading into holidays raise concerns
Stock had been up 46 percent this year before the plunge
Lululemon Athletica Inc. fell the most in almost nine months after its forecast missed some estimates, sparking concern about slowing demand and competition in athletic apparel.
Foot traffic was sluggish last quarter, a sign that shoppers are skipping trips to the mall. Lululemon also is facing mounting competition in the yogawear market, with Nike Inc. and other rivals pushing deeper into the category.
“Weak traffic trends will likely continue to weigh on the comparable sales going into the back half,” John Morris, an analyst at BMO Capital Markets, said in a note. “We would need to see traffic improve going into the holiday season before getting more constructive on the stock.”
The shares fell as much as 11 percent Friday to $68.46 in New York, the biggest intraday decline since December 2015. Before the tumble, Lululemon’s stock had gained 46 percent this year.
Earnings will be 42 cents to 44 cents a share in the third quarter, the Vancouver-based company said in a statement Thursday. The midpoint of that range missed the 44-cent average projection by analysts, according to data compiled by Bloomberg.
To cope with the challenges, the company has been working to develop new products and push beyond the core yoga-practicing customer. Chief Executive Officer Laurent Potdevin also is expanding the retailer’s overseas presence with new stores in Europe and Asia.
Sales at established locations and its e-commerce site rose 5 percent last quarter, excluding currency fluctuations. That missed the 5.9 percent gain analysts had estimated, according to Consensus Metrix.
A contributor to the shortfall last quarter: Lululemon had an online warehouse sale in the year-earlier period that helped drum up sales, Chief Financial Officer Stuart Haselden noted during a conference call.