Lululemon Athletica Inc on Thursday forecast holiday-quarter revenue and profit largely below analysts' estimates, as shoppers turn cautious about spending on higher-priced clothing amid decades-high inflation, sending its shares down 6%.

High inflation, rising interest rates and the threat of a recession in the United States have resulted in a shift in consumer spending, impacting sales of apparel and sportswear as cash-strapped consumers focus on essentials.

The guidance is a bit conservative given "we are not in the best environment with the consumer... it feels like it's an honest caution," said Jessica Ramirez, analyst at Jane Hali and Associates.

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"But... I do still think that Lululemon is playing a very strong game with the consumer."
Lululemon lifted its full-year revenue and profit forecasts and beat estimates for third-quarter results, with a 28% increase in revenue to 1.8 billion dollars year-on year.

"We are proud to have delivered another quarter of strong sales and earnings growth, despite an operating environment that remains dynamic. These results illustrate the strength and differentiation of our omni operating model and position us well to deliver ongoing value for our stakeholders. We look forward to a strong finish to our fiscal year." said Meghan Frank, Lululemon's chief finance officer

The brands gross profit increased 25% to $1 billion, while its operating margin increased 120 basis points to 19%, compared to the third quarter of 2021.

The holiday season is off to a good start with strong traffic over the extended Thanksgiving weekend, Frank said on a post-earnings call.

Lululemon's inventories at the end of the third quarter rose 85% to $1.7 billion, but chief executive officer Calvin McDonald said that due to supply chain constraints inventory levels were too lean last year and the company made the decision to build inventories this year.

"We remain comfortable with both the quality and quantity of our inventory," McDonald said.

The company forecast fourth-quarter revenue between $2.61 billion and $2.66 billion, compared to analysts' estimates of $2.65 billion, according to IBES data from Refinitiv.

​Lululemon sees current-quarter profit between $4.20 and $4.30 per share, while analysts estimate $4.30.

The Canadian brand operates via a network of 52 directly operated stores and five local language websites in countries such as Spain, Ireland, germany, the Netherland, Norway, Sweden, Switzerland, the United Kingdom and France.

Fashionnetwork.com avec Reuters