Lululemon's best-selling black leggings pile up at outlet stores
Lululemon's core black leggings, which are vital products that rarely are discounted, are piling up at outlet stores, according to Randal Konik, an analyst at Jefferies. That's an alarming issue for Lululemon, he added, showing erosion in core demand for the brand's clothes.
'We have witnessed signals of a brand in decline and see risks to earnings ahead,' Konik said in a note to clients on Thursday (Jul 16). The analyst, a long-time critic of the company's strategy, has had an underperform rating on Lululemon's stock since 2022.
Lululemon shares had declined 41 per cent this year to Wednesday's close.
A representative for Lululemon did not immediately respond to a request for comment.
Chief executive officer Calvin McDonald is trying to revive sales at Lululemon as the company faces rising competition from rivals such as Alo Yoga and Vuori. Lululemon has issued disappointing results in two straight quarters and trimmed its outlook for the full year.
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The CEO's efforts to double sales from 2021 to 2026 have hit several snags. Executives have said that profitability has been hurt by new US tariffs and warned investors that US consumers are cutting back spending. In June, Lululemon cut 150 corporate employees after a review of its organisational structure.
Lululemon's observed sales in the US fell 4.2 per cent in June, according to Bloomberg Second Measure, which tracks anonymous debit and credit transactions. That's the biggest drop since November.
An adjusted version of Bloomberg Second Measure's observed sales metric shows that the retailer's US sales are on track to decline 2.8 per cent in the quarter that runs to July. Analysts on average expect a gain of 1.9 per cent.
Meanwhile, foot traffic to Lululemon's US stores fell more than 8 per cent in June, according to Placer.ai, which measures visits through mobile device data.
'Designs still look disjointed, inventory growth is accelerating and sales cracks are expanding,' Konik said in his note. BLOOMBERG
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