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Bloomberg
Lululemon Athletica Inc shares fell the most since the start of the pandemic after lower-than-expected profitability raised concerns about a pileup of inventory and the yogawear maker’s full-year sales forecast disappointed Wall Street.
Gross margin, a key gauge of profitability, was 55.9% in the third quarter, short of analysts’ average estimate of 56.7%. Inventories surged from a year earlier — evoking similar problems experienced by retailers that have led to markdowns.
“Gross margins came in well below expectations, which is a concern, especially as inventories are up 85%,†Bloomberg Intelligence analyst Poonam Goyal said. On the company’s call with analysts, executives said the third quarter will be the high point for inventory. CFO Meghan Frank said the rate of inventory growth will moderate at the end of the fourth quarter.