Lululemon warns of hit to athleisure demand from new COVID-19 variants

A tag is seen on clothing in a Lululemon Athletica store in Manhattan, New York
A tag is seen on clothing in a Lululemon Athletica store in Manhattan, New York, U.S., December 7, 2021. REUTERS/Andrew Kelly

Dec 9 (Reuters) - Lululemon Athletica Inc (LULU.O) warned on Thursday that the spread of new coronavirus variants could lead to a slowdown in demand for athleisure clothing, even as it raised its full-year revenue and profit forecasts.

People stuck at home during the lockdowns last year ditched dressier clothes for hoodies and leggings, benefiting Lululemon, Aerie (AEO.N), Athleta (GPS.N), and prompting others, including Kim Kardashian's shapewear brand Skims, to enter the fray.

Athleisure apparel makers are still booking sales benefits, but Lululemon said the pandemic worsening due to COVID-19 variants could further impact supply chain issues and lead to temporary closures of some or all of its stores.

The new Omicron coronavirus variant first detected in southern Africa and Hong Kong has triggered uncertainty over the reopening of the global economy. read more

Lululemon has already had to shift some production out of Vietnam due to pandemic-led factory closures over the summer, use pricier air freight more and prioritize production for key holiday styles to tackle supply-chain bottlenecks.

"Demand for our brand is outpacing supply, and our business could have been even stronger without the supply chain challenges," Chief Executive Officer Calvin McDonald told analysts, adding that inventory challenges affected the launch of some new clothing collections.

Lululemon's shares fell 2% to $408 in extended trading, as the company also slashed sales outlook for its Mirror home-fitness platform.

The company's factories in Vietnam have reopened, but lingering effects of the shutdowns have caused delays in delivery of some holiday and fall products, McDonald said.

However, Lululemon raised its fiscal 2021 revenue forecast to between $6.25 billion and $6.29 billion, largely in line with estimates.

The company's revenue rose to $1.45 billion in the third quarter, compared with estimates of $1.44 billion. On an adjusted basis, the company earned $1.62 per share, beating estimates of $1.41.

Reporting by Praveen Paramasivam in Bengaluru; Editing by Ramakrishnan M. and Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.