Lululemon Stretched by Tariffs, Macro
Here's our initial take on Lululemon Athletica's (NASDAQ: LULU) financial report.
Key Metrics
| Metric | Q1 2024 | Q1 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $2.2 billion | $2.4 billion | 7.3% | Beat |
| Earnings per share | $2.54 | $2.60 | 2% | Beat |
| Comparable sales | 6% | 1% | -500 bps | n/a |
| Gross margin | 57.7% | 58.3% | 60 bps | n/a |
Americas Sales Slow As Pressure Builds
Athletic apparel specialist Lululemon beat Wall Street top- and bottom-line expectations for the quarter, delivering 7.3% revenue growth and a slight uptick in earnings per share. But CEO Calvin McDonald warned of a "dynamic macroenvironment" that the company expects to weigh on results in the quarters to come.
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First, the good news. Revenue growth came in toward the top of Lululemon's guidance, fueled by strong 6% international comparable sales. Overall international net revenue increased by 19%, or 20% when adjusted for currency fluctuations. But Americas comp sales were down 2% and overall revenue was up by just 3%, pressured by an uncertain American consumer.
Lululemon does not expect those pressures to ease in the months to come. The company cut its full-year guidance, saying it now expects to earn between $14.58 and $14.78 per share. That's down from its previous $14.95 to $15.15 per share guidance, and below Wall Street's $14.89 consensus estimate.
Immediate Market Reaction
The somber tone and cut guidance appeared to have caught investors off guard. Lululemon shares, already down 11% for the year heading into earnings, were down 20% in after-hours trading ahead of the New York open Friday.
What to Watch
McDonald pledged to "leverage our strong financial position and competitive advantages to play offense, while we continue to invest in the growth opportunities in front of us." Lululemon has the wherewithal to weather this storm, but there is only so much the company can do in this environment.
Chief financial officer Meghan Frank, on the post-earnings call, said the company is looking to take "strategic price increases" to mitigate the impact of tariffs, as well as evaluating sourcing options. But any efficiency gains made will take time to play out.
The good news for investors is Lululemon market share held up well in a rough environment, which implies there is nothing wrong with the brand. But until there is more certainty on the macro front, Lululemon stock could be stuck in neutral.
Helpful Resources
- Full earnings report
- Investor relations page
- Additional coverage
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.
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