Shares of Lululemon Athletica Inc. LULU -4.69% fell Monday morning after the activewear maker said it expects sales and earnings from the holiday quarter to come in near the low end of its previous forecasts amid renewed Covid-19 challenges.
The Omicron variant constrained capacity, disrupted staffing and led to reduced operating hours in some places last month, Lululemon Chief Executive Calvin McDonald said. Those trends have weighed on sales and earnings in the November-through-January quarter, according to the company.
In early December, Lululemon, known for its pricey yoga pants and other sportswear, said it was expecting revenue of $2.13 billion to $2.17 billion over the three-month stretch, with adjusted per-share earnings of $3.25 to $3.32. Now, it is more likely that figures will come in toward the bottom of those ranges, the company said.
Shares slid 5.2% on Monday morning to below $337 after closing last week at $355.21. Traders have sold off the company’s stock this year, with shares 14% lower so far in 2022.
The Omicron wave has sent Covid-19 cases to unprecedented levels in the U.S., leaving companies scrambling to maintain their operations as the virus disrupts the lives of staff and customers. One economist estimated that more than five million Americans could be stuck at home this week isolating themselves after a positive test.
Some forecasters have expressed concern that Omicron could exacerbate tightness in supply chains and labor markets already stretched thin by pandemic conditions. Monthly employment data released Friday suggested that firms have been competing for a limited pool of workers, with wages growing 4.7% year over year last month.
Guidance from the Centers for Disease Control and Prevention last month shortened the time that people are asked to stay isolated after contracting Covid-19, opening the door for people to return to work faster after an infection.
Lululemon posted solid sales growth in each of the fiscal year’s first three quarters, with revenue leaping by double digits year over year in each three-month span. Fourth-quarter sales of $2.13 billion, at the low end of Lululemon’s forecast, would still mark roughly 23% growth over 12 months.
Since early 2020, Vancouver, British Columbia-based Lululemon has won out from the decline of in-person work as shoppers traded khakis and dresses for sweatpants and T-shirts. As with other retailers, Lululemon also benefited from a surge in online ordering.
Through last week, shares had gained more than 50% since the start of 2020.
Omicron’s recent drag on Lululemon adds to evidence that the latest Covid-19 wave is once again denting in-person sales for retailers across the board.
“I think Lululemon is one of the best-in-class operators, a brand that’s had tremendous momentum,” Stifel analyst Jim Duffy said. “If Omicron is impacting them, it’s certainly impacting others.”
Write to Matt Grossman at [email protected]
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