Lululemon’s high-end athletic wear saw a concerning shift in customer behavior during the fourth quarter of 2024. Despite an increase in net revenue, comparable sales in the Americas were flat compared to the same period last year. The company’s CEO, Calvin McDonald, sounded the alarm on the source of the problem – economic and political uncertainty.
McDonald stated that consumers are tightening their spending due to concerns about inflation and the economy, leading to decreased foot traffic in stores. This trend is not unique to Lululemon; it is affecting the entire U.S. industry. The company’s apparel, known for its premium prices, may be a victim of budget cuts.
The rise of secondhand clothing has also contributed to this shift. According to recent data, the U.S. secondhand apparel market grew by 14% in 2024, its strongest annual growth since 2021. This trend is attributed to President Donald Trump’s tariffs on imported goods from China and Mexico.
Lululemon plans to focus on product innovation as it navigates this uncertain macro environment. CEO McDonald stated that the company will “control what we can control” and deliver high-quality new products to its customers.
The company expects to bring in $2.34 billion to $2.36 billion in revenue during the first quarter of 2024, lower than Wall Street analyst expectations. Shortly after the earnings report, Lululemon’s stock dropped by about 15%.
Source: https://www.thestreet.com/retail/lululemon-ceo-sounds-alarm-on-unexpected-customer-behavior