Lululemon Athletica LULU-Q on Thursday forecast fourth-quarter revenue and profit below expectations, signalling a bleak holiday season as customers turn thrifty and cut back spending on premium apparel and accessories.
Shares of the Vancouver-based company dropped nearly 4 per cent 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 US$3.14-billion and US$3.17-billion, and profit between US$4.85 and US$4.93 a 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 per cent, 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 US$12.34 and US$12.42 a share, compared with its prior forecast of US$12.02 to US$12.17.
It forecast net revenue between US$9.55-billion and US$9.59-billion, above US$9.51-billion to US$9.57-billion it had estimated earlier.