U.S. trade tariffs will add additional costs to Lululemon, making its performance worse. According to its annual report for the last fiscal year, more than 80% of Lululemon's products are produced in Asian countries. (Archive Photo)
Judging from the performance trends in the past few quarters, Lululemon's demand has been in a weak state. According to the annual report for the last fiscal year, more than 80% of Lululemon's products are produced in Asian countries. Therefore, the additional costs brought by the current U.S. trade tariffs have made it worse.
Friday (June 6) Focus: Major index futures in the US Wall Street stock market rose on Friday (June 6). Market investors are generally waiting for the release of non-farm employment data at a later date to further understand how trade uncertainty affects the U.S. labor market. Market insiders are also closely watching the progress of a fierce war of words between Tesla CEO Elon Musk and U.S. President Trump. At the time of 7:00, the Standard & Poor 500 futures rose 20.50 points or 0.34% to 5959.80 points; the Nasdaq 100 futures, dominated by technology stocks, rose 76.60 points or 0.36%, to 21,624.00 points; the heavyweight Dow Jones Index futures also rose 109.30 points to 42,429.00 points. Major Wall Street stock indexes closed lower in fluctuating trading as Tesla shares plummeted Thursday (5th), offsetting news that Trump and Chinese President Xi Jinping made progress in tariff negotiations. The Standard & Poor 500 fell 31.51 points on Thursday to close at 5939.30 points; the Dow Jones Index fell 108.00 points and closed at 42319.74 points; the Nasdaq 100 also fell 0.80% or 174.49 points, closing at 21547.43 points. Trading in the U.S. stock market Thursday was relatively quiet, with the exchange's total trading volume being 17.3 billion shares, less than the average trading volume of 17.9 billion shares in the past 20 days.Lululemon executives pointed out Thursday that consumers in the market are also starting to be more cautious about spending due to macroeconomic uncertainty. Despite this, the company is still considering selectively increasing the prices of some products.
The only comfort to Thursday's performance was that Lululemon's first-quarter results were slightly better than expected. According to Lululemon's first-quarter results report as of the end of April this year, the group's turnover was US$2.37 billion, slightly higher than the $2.36 billion forecast by market analysts. Its net profit per share was $2.60, which was slightly better than the analysts' generally expected $2.58. But unfortunately, many investors are looking forward and not caring about the past fiscal first quarter.According to its annual report for the last fiscal year, Lululemon has 40% produced in Vietnam, 17% produced in Cambodia, 11% produced in Sri Lanka, 11% produced in Indonesia, and 7% produced in Bangladesh. Lululemon itself does not own any manufacturing plant, and its products rely on suppliers to produce and provide fabrics.
Chief Financial Officer Meghan Frank said at the performance briefing that the group's performance forecast is calculated based on the current 30% additional tariff imposed on China by the United States and 10% additional tariff imposed on other purchasing countries of the group.
Executives currently expect the group's full-year earnings per share should be between $14.58 and $14.78. Previously at the end of March, they expected earnings per share to range between $14.95 and $15.15. As for turnover, executives maintained the forecast released at the end of March, which is the $11.15 billion to $11.3 billion region. It can be seen that Lululemon's profit rate is being compressed.
Lululemon Athletica Inc (NASDAQ: LULU)
In addition to Lululemon, there have been bad news from retailers in recent weeks. For example: Abercrombie & Fitch lowered its annual profit expectations last week in order to prepare for the tariff war; American fashion apparel brand American Eagle Outfitters not only announced a loss in the first quarter in mid-May, but also recovered its previous performance expectations for the next year, which surprised market investors; Gap, which owns sports and leisure brand Athleta, also issued a warning that tariffs will cause the company to cost as much as $150 million.
For the current fiscal quarter ended in July, executives expect turnover to range from $2.54 billion to $2.56 billion, lower than the $2.57 billion forecast by Wall Street analysts. Its earnings per share are estimated to be in the $2.85 to $2.90 region, which is much lower than analysts' expectations of $3.29.
Pre-market trading focus:Although the first-quarter performance is in line with expectations, the second-quarter performance forecast released by sportswear chain Lululemon after Thursday was not only disappointing, but also lowered its full-year earnings forecast, causing Lululemon's stock price to plummet by nearly 22% after Thursday. If the stock price trend continues during normal trading hours on Friday, it will be the stock's biggest single-day decline since March 2017.
Tesla's stock rebounded 4.50% before trading Friday night, with a deadline of $297.52. Stocks fell 14% Thursday after Musk and Trump verbally abused each other. Trump expressed disappointment at Musk's criticism of his tax and spending bill, and Musk believed that Trump's push for the bill was "disgusting evil." Subsequently, Trump threatened to cancel the government's subsidies and contracts for Musk's companies, intensifying the war of words between the two sides. Trump's Trump Media & Technology Group shares rebounded slightly by 0.50% before trading Friday, at $20.22. This is the parent company of Truth Social, a social media website founded by Trump. The group's shares fell 8% Thursday as Musk's relationship with Trump broke down. Chip maker Broadcom reported a turnover of $15 billion in fiscal quarter, slightly surpassing analysts' forecast of $14.96 billion. Among them, sales of artificial intelligence business increased by 46% year-on-year to US$4.4 billion. Broadcom expects AI-related revenue to increase to $5.1 billion in the third quarter. Although the performance is good, Broadcom's stock price fell by 3.11% before trading Friday, and was reported at $251.85. Friday, let’s take a look at the latest financial results of sportswear chain Lululemon. The stock fell sharply by 20.79% before trading Friday, and was at $262.00. Pre-market active stocks are in sequence: Tesla, Nvidia, Palantir Technologies, Lucid Group, and Plug Power. At the time of press time, the stock prices of these five active stocks rose.