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Lululemon warns of demand risks from potential virus resurgence

Lululemon Athletica on Tuesday warned of more store closures and risks to demand from a potential resurgence in Covid-19 cases, even as it forecast first-quarter revenue above analysts’ estimates.

The company said any surge in cases, including the new variants, could hamper demand and disrupt the supply chain at a time its stores are struggling with capacity restrictions, sending its shares down 1.6 per cent in extended trading.

The company’s stock, however, has gained 64 per cent over the past 12 months, as Lululemon saw a surge in demand for its leggings and sports bras from stuck-at-home consumers looking for comfortable apparel.

“Regardless of vaccines, the sense of comfort will continue to sell and Lululemon has found a very strong assortment in between comfort and active wear,” said Jessica Ramirez, retail analyst at Jane Hali & Associates.

The company is also banking on its home fitness startup acquisition, Mirror, to provide an additional revenue stream this year, and expects its top line to rise as much as 65 per cent to US$275 million in 2021 on booming demand for online workout classes.

Lululemon said it would ramp up investments in the startup, which offers subscriptions for live workout classes on mirror-like video monitors, to sustain its growth.

The Canadian company forecast first-quarter revenue of $1.10 billion to $1.13 billion, above analysts’ estimate of $999.5 million, according to IBES data from Refinitiv.

It expects first-quarter adjusted earnings per share of 86 cents to 90 cents, above estimates of 82 cents.

Lululemon’s full-year earnings per share expectations of $6.30 to $6.45, however, were below estimates of $6.72.

Net revenue rose 24 per cent to $1.73 billion in the fourth quarter, beating estimates of $1.66 billion, as online sales jumped 92% on a comparable basis.

  • Reporting by Uday Sampath and Mehr Bedi in Bengaluru; Editing by Vinay Dwivedi, of Reuters.

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