Lululemon forecasts, the brand’s revenues for Q1, FY25 are likely to fall short of Wall Street's expectations, projecting $2.34 to $2.36 billion compared to the anticipated $2.39 billion. This comes as the high-end athletic wear brand is experiencing a shift in consumer behavior.
Despite a 13 per cent Y-o-Y in net revenue during Q4, FY24, Lululemon's comparable sales in the Americas remained flat compared to the previous year. Placer.ai data indicates a significant slowdown in store traffic growth, rising only 2.4 per cent Y-o-Y year-over-year, as against 8.2 per cent in the previous quarter.
Calvin McDonald, CEO attributes this to weakening consumer demand, despite new product launches. He cites the current macroeconomic environment, marked by economic and political uncertainty, as a key factor driving more cautious consumer spending. A company survey conducted with Ispos revealed rising concerns about inflation and the economy leading to reduced spending.
Lululemon's premium pricing, with items often exceeding $100, makes it susceptible to budget cuts during economic downturns. Consumers in the US are increasingly turning to secondhand clothing as a cost-saving measure. Secondhand apparel market in the country grew by 14 per cent in 2024, its strongest growth since 2021.
Furthermore, recent tariffs imposed on goods imported from China, Mexico, and Canada are expected to further drive consumers towards more affordable options like secondhand apparel. As per a ThredUp and GlobalData survey, 59 per cent of consumers are likely to seek cheaper alternatives if tariffs increased apparel prices, and 34 per cent plan to allocate their apparel budget to secondhand purchases in the next year.
In response to these challenges, Lululemon plans to focus on product innovation to navigate the uncertain economic landscape. The brand emphasizes its commitment to delivering new and innovative products that meet customer expectations.
