Shares of Lululemon (LULU) fell 9% after the Canadian apparel company announced that its profit margins are likely to decline going forward.
In a news release, the Vancouver-based company said that it expects gross margins to decline by between 0.9 and 1.1 percentage points in its upcoming fiscal quarter.
Lululemon had previously forecast that gross margins would increase by between 0.1 and 0.2 percentage points.
Last year, the company’s gross margin in its fiscal fourth quarter was 58.1% on $1.2 billion U.S. in profits.
Lululemon's stock closed down 9% at $298.66 U.S. per share following the lowered forward guidance. The shares are down 14% over the past year.
High inventory levels and inflation have pressured Lululemon’s sales and profit margins over the last year.
In its most recent quarter, the company's gross margin level fell 1.3 percentage points compared to 2021, due in part to markdowns on the yoga pants and other products it sells.
However, while Lululemon downgraded its profit margins, it raised its sales forecast following strong holiday activity.
The company said that its net sales are now expected to be in a range of between $2.66 billion U.S. and $2.7 billion U.S., an increase of about 25% from a year ago.
Lululemon is scheduled to report its next earnings in March of this year.
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