Lululemon, the apparel retailer known for yoga garments, said Monday its profit will be pinched by President Donald Trump’s tax overhaul before the benefits of a significantly lower rate kick in.
The Vancouver, Canada-based company will post a “significant” charge for the three months through December because of the Republican plan’s “deemed repatriation” provision, according to a statement. The clause assesses a one-time levy of 15.5 percent on cash holdings and 8 percent on the remainder, after which businesses may bring the money back to the U.S. without a penalty.
Still, Lululemon expects a boost this year from the law’s reduction of the top corporate tax rate to 21 percent from 35 percent; its effective rate for 2017 was about 30.4 percent. U.S. stores qualified for few of the tax breaks afforded to other industries such as manufacturing, and the new law may ultimately let them add as many as 1.5 million workers, according to the National Retail Federation, a lobbying group for the $2.6 trillion industry.
Last week, department-store chain Macy’s boosted its full-year 2017 earnings forecast by 1.7 percent to $3.69 a share because of the cut; the company will reap about a month of benefits from the plan since its fiscal year ends in late January.
The tax bill also offered a break to individuals, who will probably spend about a third of the windfall, further buoying retailers, according to Bank of America economists.
Lululemon boosted its fourth-quarter sales forecast 3.4 percent on Monday to $915 million after higher-than-anticipated holiday sales. The company’s shares have climbed 1.3 percent this year to $79.60 in New York trading.
“We’re pleased to see the momentum in our business continuing,” Chief Financial Officer Stuart Haselden said Monday at a conference in Orlando.
