Lululemon forecasts bleak fourth-quarter revenue, profit on weaker demand

Lululemon Athletica Inc on Thursday forecast fourth-quarter revenue and profit below expectations, signaling a bleak holiday season as customers turn thrifty and cut back spending on premium apparel and accessories.

Shares of the Vancouver, Canada-based company, dropped nearly 4% in extended trading.

Lululemon had enjoyed buoyant demand for its athleisure and comfortable clothing in the last several quarters but with costs of living trending higher, some of its customers have started trimming down spending on premium clothing.

Lululemon’s holiday forecast mirrors sentiments from other U.S. retailers such as Kohl’s, which has hinted at a choppy start to the holiday season.

The company expects fourth-quarter net revenue between $3.14 billion and $3.17 billion, and profit between $4.85 and $4.93 per share, both below analysts’ estimates, according to LSEG data.

Even though Thanksgiving weekend sales showed optimism among customers, some consumers have either largely cut back on spending or are waiting to shop closer to Christmas.

A recent report from the Commerce Department’s Bureau of Economic Analysis showed that consumer demand was slowing as Americans grapple with higher borrowing costs, resumption of student loan repayments and depleted excess savings among low-income households due to inflation.

However, Lululemon’s third-quarter gross margins were up 110 basis points to 57%, helped by easing costs of production and lower freight expenses.

The company also beat third-quarter results and raised annual profit as well as revenue forecasts.
Lululemon now expects full-year 2023 profit between $12.34 and $12.42 per share, compared with its prior forecast of $12.02 to $12.17.

It forecast net revenue between $9.55 billion and $9.59 billion, above $9.51 billion to $9.57 billion it had estimated earlier.