Lululemon forecast cut hits shares, underscores challenge for next CEO

Shares of Lululemon Athletica fell about 18% ​in premarket trading on ​Friday after the sportswear maker cut ‌its ​full-year forecast for a second time, underscoring the hurdles awaiting incoming CEO Heidi O'Neill. Lululemon, known for its ‌high-priced stretchy pants and athletic tops, has been grappling with declining sales for several quarters as it seeks to recover from merchandising missteps, an overreliance on promotions ‌and intensifying competition.

The firm's shares fell to $100.1 premarket, and if losses hold, it ‌would wipe out more than $2.5 billion from Lululemon's market value and deepen the stock's year-to-date decline to about 41.5%. O'Neill, a former Nike executive who takes the helm on September 8, will ⁠be ​tasked with reviving ⁠demand in North America, Lululemon's largest market, and restoring growth.

Revenue in the Americas, the company's ⁠largest market, fell 8% in the second quarter, compared with a 1% increase a ​year earlier, as the firm struggles to reignite demand amid inflationary pressure on ⁠consumer spending. Morgan Stanley said that sales could deteriorate further in the second half, with limited ⁠visibility ​on when demand might recover, raising the risk of continued pressure on margins.

Following the results, at least 12 brokerages lowered their price targets ⁠on the shares, with Piper Sandler setting the Street-low target of $80, according to data ⁠compiled by ⁠LSEG. The company trades at about 11.50 times forward earnings, compared with 20.76 for Nike and 13.41 for Adidas , according ‌to LSEG ‌data.