Lululemon Athletica Inc. has recently raised its guidance. The company points to the tough overall retail environment, weighed down by the impacts of tariffs and intensifying competition. Calvin McDonald, the CEO of the now-public company, expressed his concerns about the current state of the market. He painted it as a terra incognita rife with menace. Consecutively, Lululemon has cut its full-year earnings guidance beneath consensus, hinting at a broader change in its forward-moving business approach.
In a recent statement, McDonald noted that the “current tariff paradigm has brought uncertainty into the retail environment.” This greater-than-expected uncertainty has led Lululemon to downgrade its earnings guidance. Its updated forecast now has earnings coming in at between $14.58 and $14.78 per share. That’s down from a high-end prior guidance of between $14.95 and $15.15 per share.
No wonder Lululemon just lowered its earnings guidance citing a “volatile macroenvironment. This lack of availability has eroded consumer demand here in the U.S. The news comes as the company has recently announced a lowered forecast for customer traffic to its U.S.-based stores, adding pressure to the company’s growth plans. McDonald indicated that Lululemon is “definitely not happy where the growth is in the US,” highlighting the company’s need to adapt to shifting market conditions.
Rising competition from other athleisure brands, and even general athletic companies have greatly attributed to Lululemon’s struggles as well. Vuori and Alo have grown into formidable competitors. This burgeoning competition is forcing Lululemon to do more to safeguard its business. Lululemon’s recent success has only made their competition more intense. As a response, the company is taking a hard look at its strategies to improve its brand image.
Even through these obstacles, McDonald remains bullish on Lululemon’s bottom line. He emphasizes in his piece that the company has liquidity providing “exceptional fiscal flexibility.” Considering this view, even though Lululemon is currently plagued with short term headwinds, long term, there are avenues the brand could explore to stay afloat amidst these stormy waters.