Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Lululemon Athletica Are Down Sharply Today

By John Rosevear - Updated Mar 12, 2020 at 3:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Retail traffic is already slumping on virus fears.

What happened

Shares of lululemon athletica (LULU -2.00%) were down sharply on Thursday afternoon as concerns about the growing virus pandemic drove a broad-based market sell-off. 

As of 1 p.m. EST, Lululemon's shares were down about 7.6% from Wednesday's closing price.

So what

Upscale yoga wear specialist Lululemon has a significant online business, but it's still a brick-and-mortar retailer with over 450 stores around the world. As with other retailers, investors in Lululemon are concerned that efforts to slow the spread of the COVID-19 virus via "social distancing" seem likely to put a heavy damper on retail foot traffic.

The interior of a Lululemon store.

Image source: lululemon athletica.

There are already signs that consumers are staying home. In a note on Wednesday, Morgan Stanley analysts led by Kimberly Greenberger said U.S. retail traffic fell 9.1% last week, while luxury retail traffic fell 14.7%.

The team concluded that the declines were due to an increase in news coverage of the virus in the United States. Given that coverage has increased dramatically in the last few days, next week's numbers are likely to be considerably worse.

Now what

Lululemon has already been hit by the effects of the virus in China, where it operates 38 stores. As the virus spreads through Europe and North America, the impact on the company's sales is likely to be quite significant. We'll find out more when Lululemon reports its fourth-quarter and fiscal 2019 earnings on March 26. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
$287.48 (-2.00%) $-5.88
Morgan Stanley Stock Quote
Morgan Stanley
$77.44 (-0.49%) $0.38

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.