Lululemon Stock Craters After Athleticwear Brand Cuts Annual Profit View, Issues Weak Q2 Forecast

Lululemon (LULU) shares tumbled 22% in after-hours trading Thursday after the activewear giant issued a weaker-than-expected outlook for the second quarter and cut its full-year profit forecast.

If the move holds in the regular session, it would be the worst intraday decline for the stock since March 2017. The stock was among the top 10 trending tickers on Stocktwits at the time of writing.

Lululemon, which has been seeing weak demand trends, now faces additional costs from U.S. trade tariffs. Over 80% of the company's products are manufactured in Asian countries, according to its annual report.

The company noted that its U.S. sales were not meeting expectations, as consumers are spending more cautiously amid macroeconomic uncertainties. The company is considering selectively hiking prices.

Lululemon now sees full-year earnings per share to be between $14.58 and $14.78. Previously, it expected EPS in the range of $14.95 to $15.15. It maintained its previously issued revenue guidance.

For the current quarter ending in July, the company guided for revenue of between $2.54 billion and $2.56 billion, which is shy of Wall Street's estimate of $2.57 billion. Its EPS forecast of $2.85 to $2.90 was far below analysts' expectations of $3.29.

On Stocktwits, retail sentiment for the company held in the 'extremely bullish’ territory.

Several users viewed the weak results and the ensuing stock reaction as an ideal buying opportunity.

Lululemon's first-quarter results were slightly better than expectations. Revenue was $2.37 billion versus the expectation of $2.36 billion. Earnings were $2.60 per share, also above the expected $2.58.

Comparable sales increased 1%, falling short of the 3% growth forecast by analysts.

In recent weeks, Abercrombie & Fitch (ANF) has lowered its annual profit forecast, while American Eagle (AEO) has withdrawn its outlook, and Gap (GAP), which owns athleisure brand Athleta, has warned of up to $150 million in additional costs resulting from tariffs.

Up till their last close, Lululemon shares are down 13.5% this year.

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