Lululemon Warns Against Omicron Variant

·3 min read

Lululemon Athletica is feeling the effects of Omicron.

On Monday, the Vancouver, B.C.-based athletic apparel and accessories retailer revised its current quarter guidance to reflect ongoing constraints caused by the pandemic and new Omicron variant.

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For the fourth quarter, the company is now anticipating net revenues will be on the low end of its previous-stated range of $2.12 billion and $2.16 billion. Diluted earnings per share and adjusted diluted earnings per share are also expected to be on the low end of the company’s ranges of $3.24 to $3.31 and $3.25 to $3.32 each, respectively. Shares fell 7.5 percent at the start of Monday’s session, as a result, ultimately closing down 1.91 percent to $348.43 apiece.

“We are closing out a strong 2021 in the coming weeks and we’re pleased with how Lululemon has delivered over the course of the year,” Lululemon’s chief executive officer Calvin McDonald said in a statement. “We started the holiday season in a strong position, but have since experienced several consequences of the Omicron variant, including increased capacity constraints, more limited staff availability and reduced operating hours in certain locations. I am proud of how our teams continue to deliver for our guests and we are excited about what the future holds for Lululemon.”

Lululemon’s at-home fitness center Mirror offers live and on-demand fitness sessions, as well as one-on-one training sessions. - Credit: Courtesy Photo
Lululemon’s at-home fitness center Mirror offers live and on-demand fitness sessions, as well as one-on-one training sessions. - Credit: Courtesy Photo

Courtesy Photo

The lowered guidance is Lululemon’s second during the recent holiday shopping season. In December, the company reduced its expectations for Mirror — the at-home fitness system it purchased for $500 million in 2020 — citing supply chain headwinds and increased competition in the at-home fitness space at the time.

The company now anticipates revenues for Mirror, which most recently expanded in Canada and represents about 3 percent of Lululemon’s total annual revenues, to be in the range of $125 million to $130 million for the year, down from previous estimates of $150 million. (Lululemon recently named Amazon alum Michael Aragon as Mirror’s next chief executive officer, set to take charge on Jan. 17.)

Lululemon also remains embroiled in copyright and trademark issues with both Peloton and Nike.

Meanwhile, executives on December’s conference call praised Lululemon’s continued strength, despite industry-wide supply chain headwinds that have caused some competitors to trim store hours and even temporarily close select locations.

McDonald acknowledged additional air freight expenses and last summer’s factory closures in Vietnam, but said inventory was actually up 22 percent in the most recent quarter, compared with 2020 and pointed out that Thanksgiving Day was Lululemon’s highest volume e-commerce day ever. The company said at the time that it was able to hire roughly 7,000 new associates in the lead-up to the holidays, despite the current tight labor market.

“Our teams continue to execute at a high level, which has enabled our strong third-quarter performance and the upward revision to our guidance,” Meghan Frank, Lululemon’s chief financial officer, said at the time. “We are pleased with these results given the ongoing, industry-wide supply chain issues we continue to navigate. While there are several large-volume weeks ahead of us, we feel well positioned for a strong end to 2021.”

For the full 2021 fiscal year, Lululemon expects net revenues to be in the range of $6.25 billion to $6.29 billion, with diluted earnings per share in the range of $7.38 to $7.45 for the year.

Shares of Lululemon are down 2.38 percent, year-over-year.

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