Lululemon cut its full-year forecast for a second time, and shares dropped about 18% in premarket trading on Friday. The forecast cut underscores the hurdles awaiting incoming CEO Heidi O'Neill, who takes the helm on September 8.
Lululemon shares fell to $100.1 in premarket trading on Friday after the sportswear maker cut its full-year forecast for a second time. If the losses hold, they would wipe out more than $2.5 billion from Lululemon's market value and deepen its year-to-date decline to about 41.5%.
The retailer, known for its high-priced stretchy pants and athletic tops, has been grappling with declining sales for several quarters as it works to recover from merchandising missteps, an overreliance on promotions and intensifying competition. Heidi O'Neill, a former Nike executive, takes the helm on September 8 and will be tasked with reviving demand in North America, the company's largest market, and restoring growth.
Americas revenue slides as competition intensifies
Revenue in the Americas, Lululemon's largest market, fell 8% in the second quarter, compared with a 1% increase a year earlier, as the firm struggles to reignite demand amid inflationary pressure on consumer spending. Morgan Stanley said sales could deteriorate further in the second half, with limited visibility on when demand might recover, raising the risk of continued pressure on margins.
Brokerages slash price targets
Following the results, at least 12 brokerages lowered their price targets on the shares, with Piper Sandler setting the Street-low target of $80, according to data compiled by LSEG. The company now trades at about 11.50 times forward earnings, compared with 20.76 for Nike and 13.41 for Adidas, according to LSEG data.
Source: Reuters via Investing.com
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