Lululemon lowered its guidance and posted its first revenue miss in more than two years on Thursday after it botched a highly anticipated product launch and growth slowed in the Americas.
The company now expects full-year net revenue to be between $10.38 billion and $10.48 billion, down from a previous range of between $10.7 billion and $10.8 billion. Lululemon anticipates earnings per share will be in a range of $13.95 to $14.15, down from previous guidance of $14.27 to $14.47.
Here’s how company did in its fiscal second quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:
- Earnings per share: $3.15 vs. $2.93 expected
- Revenue: $2.37 billion vs. $2.41 billion expected
Lululemon shares rose more than 2% in extended trading after initially falling.
The company’s reported net income for the three-month period that ended July 28 was $393 million, or $3.15 per share, compared with $342 million, or $2.68 per share, a year earlier.
Sales rose to $2.37 billion, up about 7% from $2.21 billion a year earlier. Beyond total sales, Lululemon also missed expectations on comparable sales, which grew 2%, well behind estimates of 5.9%, according to StreetAccount. Comparable sales in the Americas fell 3%.
The trend doesn’t appear poised to improve in the current quarter. Lululemon said it expects sales to grow 6% to 7%, worse than the 9.2% growth that analysts had expected, according to LSEG.
However, Lululemon’s profit guidance is roughly in line with what Wall Street anticipated. The company said it expects third-quarter earnings per share to be between $2.68 and $2.73, compared with estimates of $2.70, according to LSEG.
During the quarter, Lululemon pulled its Breezethrough leggings, launched in early July, after it received a wave of complaints about the product’s unflattering fit.
On a call with analysts, CEO Calvin McDonald addressed the Breezethrough launch and said it was an opportunity for the company to “test and learn.” He added Lululemon bought a small amount of product for the launch.
“While guests were excited by the fabric, the design didn’t meet their expectations. Listening to our guests is central to who we are and how we grow our brand, and we took the right step of pausing on sales and look forward to reintroducing the fabric in the future,” said McDonald. “This decision had a negligible impact on our performance in this quarter.”
The botched launch came after the company struggled with other self-inflicted issues with its assortment, including not having the colors and sizes that its core customers desired, which has had an impact on sales in the U.S. During the quarter, sales grew only 1% in the Americas, the company’s largest region.
On the call with analysts, McDonald acknowledged Lululemon’s women’s business has slowed down in the U.S. He said the company has determined the “most significant factor” affecting the segment is a lack of new styles, which has hurt sales of…
Read More: Lululemon (LULU) earnings Q2 2024
