Lululemon Athletica’s (LULU) stock is down 8% after the Vancouver-based athletic apparel retailer reported lower-than-expected profitability and issued weak forward guidance.
Lululemon’s gross margin, a key indicator of profitability, was 55.9% in this year’s third quarter, short of analysts’ average estimate of 56.7%. The Canadian retailer also reported a rise in inventory levels from a year earlier, raising the prospect of price markdowns in coming months.
Looking ahead, Lululemon raised its sales forecast for the full year to $7.99 billion. However, that was below analysts’ average estimate, causing the share price to fall in after hours trading.
Lululemon reiterated that it plans to double its sales by 2027 through the opening of more stores, expanding overseas, and selling more clothing items to men.
The company is also piloting a two-tier membership program to keep customers engaged.
Prior to the latest earnings release, Lululemon’s stock had declined 3% this year to trade at $374.51 U.S. per share.
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