Lululemon just announced that sales growth is expected to slow down this quarter. It’s the first sign that the yoga-wear retailer is slowing down. Lululemon has had explosive growth in recent years, and even inspired several copycats.
The company expects same-store-sales in the quarter to rise by 8 or 9 per cent. While the company is usually conservative in these forecasts, the number shows a major slow-down from last year, when sales climbed 26 per cent, Reuters reports.
For the past few years, Lululemon has expanded rapidly, opening stores in wealthy areas. But it’s possible the retailer has saturated all the markets of women willing to pay $98 for yoga pants, and growth could be limited in the future.
The announcement about sales growth slowing also shows a possible premonition from a mega-investor: shares for Lululemon plunged in September on rumours that David Einhorn was shorting the stock.
At the time, analysts speculated that there were a few reasons he might be doing so. Many of their concerns still ring true today.
To start, there is a sense that Lululemon’s customers will wise up and stop shelling out for workout attire.
“At some point the shorts – in the past they’ve included Whitney Tilson’s T2 Partners – feel these brand-obsessed dilettantes will come to their senses and the gravy train will end for (founder) Chip Wilson, (CEO) Christine Day and all the others who benefit from Lululemon’s success,” according to a report on Investopedia.
There is also mounting competition within the industry, as Gap’s lower-priced Athleta line continues to grow.
For years, Lululemon benefited from a casual fashion-cycle and a lack of competition. It looks like its glory days could be coming to an end.
Here’s what shares have looked like for the past five years:
Photo: Yahoo! Finance
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