Lululemon Athletica Inc. is lowering its fourth-quarter earnings estimates as the Omicron variant curbs the retailer’s sales.
The Vancouver-based company says it now expects its net revenue and earnings to be on the low end of previously announced ranges.
Calvin McDonald, CEO of the athletic apparel retailer, says Lululemon started the holiday season in a strong position.
But he says the company has since experienced several consequences as a result of the surge in COVID-19 cases and changing restrictions.
He says Lululemon has been impacted by increased capacity constraints in stores, more limited staff availability and reduced operating hours in some locations.
David Swartz, an equity analyst at Morningstar, says Lululemon has consistently smashed sales and earnings expectations over the past three years, making it surprising to see any weakness emerge.
While he says one mild earnings miss does not materially impact valuation, the financial services firm has long had concerns that Lululemon is significantly overvalued
In a client note last March, Morningstar said Lululemon’s valuation “is as stretched as its leggings.”
Lululemon’s share price dropped a little more than six per cent following Monday’s announcement, and was down roughly 30 per cent from its all-time high in November.
The company’s shares were trading for about US$333.30 midday on the Nasdaq composite. Swartz says Morningstar’s fair value estimate is US$193.
Lululemon says it expects the company’s net revenue to be toward the low end of its range of US$2.125 billion to US$2.165 billion.
It expects diluted earnings per share and adjusted diluted earnings per share to be toward the low end of its ranges of US$3.24 to US$3.31 and US$3.25 to US$3.32, respectively.