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Lululemon Stock Slides After Omicron-Linked Warning To Q4 Profits

Lululemon said staff shortages and reduced store hours would likely drag fourth quarter profits to the lower end of its previously-published guidance.

Lululemon Athletica  (LULU) - Get Lululemon Athletica Inc Report shares slumped lower Monday after the athletic and leisure apparel group cautioned that its fourth quarter earnings would likely be hit by staff shortages and reduced store hours linked to the global surge in Omicron infections.

Vancouver-based Lululemon said fourth quarter revenues would likely come in at the lower end of its $2.15 billion to $2.165 billion forecast range, with adjusted profits in the region of $3.25 to $3.40 share. The forecast cut follows a previous warning that factory closures in Vietnam, port disruptions in Asia and reduced air capacity will add to supply chain pressures and increase costs, squeezing gross margins over the second half of the year.

“We are closing out a strong 2021 in the coming weeks, and we’re pleased with how lululemon has delivered over the course of the year," said CEO Calvin McDonald. "We started the holiday season in a strong position but have since experienced several consequences of the Omicron variant, including increased capacity constraints, more limited staff availability, and reduced operating hours in certain locations."

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"I am proud of how our teams continue to deliver for our guests, and we are excited about what the future holds for lululemon,” he added.  

Lululemon shares were marked 3.9% lower in early trading Monday to change hands at $340.75 each, a move that would extend the stock's six-month decline to around 10%. 

Last week, sports apparel giant Nike  (NKE) - Get NIKE, Inc. Class B Report filed a lawsuit against Lululemon accusing it of patent infringement for making and selling the Mirror Home Gym and related mobile apps without its authorization.

Lululemon bought Mirror, an at-home fitness company with an interactive workout platform featuring live and on-demand classes, for about $453 million in July 2020.