Lululemon Calls Out Weak Brand Awareness, as Sluggish Forecast Sinks Shares

Tiger Newspress
03-28

As Lululemon Athletica’s full-year forecast sank shares on Thursday, executives for the athleisure giant called out the usual difficulties, like tariffs and broader uncertainty among inflation-weary consumers.

U.S.-listed shares of the company fell 10% in premarket trading on Friday.

But they also said another issue was holding it back: Not enough people around the world were familiar enough the brand.

“We continue to focus on increasing our brand awareness, which remains low in nearly every market in which we operate,” Lululemon Chief Executive Calvin McDonald said during the company’s earnings call on Thursday.

That awareness was the lowest in nations like France, Germany and Japan. It was a bit higher in China. And while it was greater in the U.K., Australia and in the U.S., he said the company could do more to get the word out about what it is.

He said the company had gotten more aggressive with its marketing efforts. Those included a display of its logo on the Las Vegas sphere in connection with a marathon, and a studio set up in New York for the launch of its new Glow Up line of workout wear for women.

McDonald also said that in the U.S., a bigger push into new products and product refreshes last year was resonating with shoppers, even if broader skittishness about the economy had weighed on consumer spending and store traffic overall. Along with Glow Up, he also called out its looser-fitting Daydrift line, which he said could become a new core franchise at the company, as well as its BeCalm yoga-wear.

The company forecast full-year sales that were below Wall Street’s expectations. The company, in its earnings release, noted “ongoing macro uncertainties.”

For the full year, Lululemon said it expects sales of $11.15 billion to $11.3 billion, with the midpoint below the $11.3 billion expected by analysts.

Lululemon reported $3.61 billion in sales for the fourth quarter, a 13% year-over-year gain. The company reported earnings per share of $6.14. Same-store sales rose 3% overall, but were flat in the Americas region, while notching a 20% gain internationally.

Analysts polled by FactSet expected Lululemon to report earnings per share of $5.85, on revenue of $3.58 billion and same-store sales growth of 5.4%.

The worse-than-expected same-store sales growth “signals a domestic slowdown,” Brian Mulberry, client portfolio manager at Zacks Investment Management, said in emailed commentary. While Lululemon has shown signs of gaining traction on TikTok as the spring season picks up steam, other analysts have worried about rising competition and a shift away from tighter fits.

Lululemon’s stock has fallen 12.6% over the past 12 months, amid worries about a cautious consumer more focused on essentials than on clothing. However, Raymond James analysts have pointed to new clothing offerings, including its new Glow Up gear, as possible bright spots. 

However, Jefferies analyst Randal Konik, in a research note following Lululemon’s results on Thursday, struck a more pessimistic tone.

“The theme remains that growth continues to fade, making further increases in sales and [earnings] challenging,” he said.

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