Lululemon shares fall as revenue drops more than expected

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Lululemon Athletica Inc. missed Wall Street estimates for quarterly revenue and profit for the first time in about three years due to coronavirus-led store closures, sending the yoga apparel maker’s shares down about 7 per cent on Thursday.

Athletic wear makers like Lululemon and rival Nike have flagged higher demand for apparel and merchandise as consumers turned to home workouts during lockdowns, but that failed to offset the hit from store closures.

Lululemon’s yoga classes, popular among its target millennial shoppers, were also put on hold due to the pandemic, leading to a 17-per-cent decline in revenue.

Net revenue came in at US$652-million in the first quarter ended May 3, below expectations of US$688.4-million, according to Refinitiv IBES data.

Still, sales from its app and website surged 70 per cent in the quarter, with a 170-per-cent rise reported in Europe and 150 per cent in Australia, as consumers bought more yoga and training products.

“What we experienced in quarter one and will, quite honestly, for a little bit through 2020, are some short-term operational challenges,” chief executive officer Calvin McDonald told analysts.

“But the demand for the brand and the demand for the category, I feel, has only strengthened through this [pandemic]. And those short-term operational challenges will mitigate. They will go away.”

For the current quarter, the company expects digital comparable sales to jump about 125 per cent. Total revenue could decline in the high single digits, improving to a high single-digit increase in the fourth quarter, the company said.

Net income plunged 70.4 per cent to US$28.6-million in the first quarter. On a per share basis, the company earned 22 U.S. cents, a cent lower than expectations.

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