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Lululemon’s Stock Falls 10% On Weak Guidance

The stock of Lululemon Athletica (LULU) is down 10% after the Canadian retailer issued weak forward guidance and said that its North American sales are slowing down.

The Vancouver-based company, which specializes in athletic wear, reported financial results for the fourth-quarter 2023 holiday period that beat Wall Street expectations.

Lululemon announced earnings per share (EPS) of $5.29 U.S. versus $5.00 U.S. that was expected among analysts.

Revenue in the final quarter of last year totaled $3.21 billion U.S. compared to $3.19 billion U.S. that was forecast. Overall, sales were up 16% from a year earlier.

However, sales rose 9% in North America compared to 29% growth in the previous year. While Lululemon is still growing in the U.S. and Canada, its sales have slowed considerably.

Lululemon is struggling with a slowdown in discretionary spending that’s hurt the apparel industry as consumers choose experiences over goods such as clothing.

The company also faces more competition from new entrants such as Alo Yoga and Vuori. Lululemon has been working to build out its sneaker segment and grow its men’s business.

The retailer is also concentrating on growing in foreign markets and has shown success with its international expansion.

Lululemon’s Q4 2023 international sales grew 54% year-over-year, with sales in China increasing 78% and 36% growth across all other international markets.

As for guidance, Lululemon said that it expects revenue of $2.18 billion U.S. to $2.20 billion U.S., representing growth of 9% to 10%, in the current first quarter of 2024.

Analysts were expecting growth of 12.5% in this quarter, according to data compiled by LSEG.

Lululemon also said that it expects earnings of $2.35 U.S. to $2.40 U.S., which is below the $2.55 U.S. that analysts had forecast.

For all of this year, Lululemon said that it expects sales to be between $10.70 billion U.S. and $10.80 billion U.S., compared with estimates of $10.90 billion U.S.

Full-year earnings are forecast at $14 U.S. and $14.20 U.S. a share compared to estimates of $14.13 U.S. per share.

Prior to today (March 22), Lululemon Athletica’s stock had gained 58% over the last 12 months to trade at $478.84 U.S. per share.