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Jan 10, 2022

Lululemon falls after warning Omicron to hurt sales, earnings

Demand for active wear will remain high: Analyst on Lululemon revising Q4 outlook amid Omicron

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Lululemon Athletica Inc. shares tumbled after the company warned that financial results will come at the low end of previous guidance, saying the omicron coronavirus variant was constraining its operations.

Sales for the fiscal fourth quarter, which ends Jan. 31, are trending toward the bottom of its range of US$2.125 billion to US$2.165 billion, the maker of yoga pants said in a statement Monday. Lululemon also guided to the low end of its adjusted-profit forecast of US$3.25 to US$3.32 a share.

“We started the holiday season in a strong position but have since experienced several consequences of the omicron variant, including increased capacity constraints, more limited staff availability and reduced operating hours in certain locations,” Chief Executive Officer Calvin McDonald said in the statement.

The trimmed outlook is the latest fallout from the fast-spreading omicron variant. It has already upended airlines’ operations, with Alaska Air Group Inc. last week cutting 10 per cent of its remaining January flight schedule due to an “unprecedented” number of employees calling in sick. The impact is spreading in the consumer sector as well: Restaurant chain Denny’s Corp. on Monday said omicron has caused “near-term uncertainty” for its business.

The situation is a blow to Lululemon, which had benefited recently from sustained demand for comfy clothes during the pandemic. That had helped it counter the impact of industrywide logistical issues such as port congestion and labor shortages.

Lululemon shares fell as much as 8.9 per cent on Monday in New York before paring the losses somewhat.