Lululemon exceeded Wall Street’s expectations for its fiscal first-quarter earnings, reporting earnings per share of $2.60 versus the expected $2.58 and revenue of $2.37 billion compared to the forecasted $2.36 billion. Net income for the quarter was $314 million, slightly down from $321 million a year earlier. Despite the positive performance, the company cut its full-year earnings outlook, reflecting broader concerns about the macroeconomic environment and shifting consumer behavior.
Leadership Eyes Growth as Tariffs, Cautious Shoppers Prompt Lowered Earnings Outlook
CEO Calvin McDonald expressed dissatisfaction with the company’s U.S. growth, citing cautious consumer behavior. He emphasized Lululemon’s intent to maintain an aggressive growth strategy, leveraging its strong financial footing. CFO Meghan Frank announced modest strategic price increases on select items to offset the impact of tariffs. These increases will begin rolling out in the latter half of the second quarter and continue into the third.
Lululemon Tops Q1 Estimates but Slashes Outlook as Tariffs and Weak U.S. Sales Hit StockThe company lowered its full-year earnings per share forecast to a range of $14.58 to $14.78, down from the previously expected $14.95 to $15.15. This adjustment comes amid heightened uncertainty due to the U.S. tariff regime, a challenge also affecting other retailers like Abercrombie & Fitch, Macy’s, and Nike. McDonald acknowledged these pressures but asserted that Lululemon is better positioned than many peers to handle the current trade environment.
Weak Outlook, Tariff Pressures, and Supply Chain Risks Weigh Heavily on Lululemon’s Stock
Despite maintaining its full-year revenue forecast of $11.15 to $11.3 billion, Lululemon expects second-quarter earnings per share to range between $2.85 and $2.90, well below analysts’ expectations of $3.29. The company’s comparable sales rose only 1%, with a 2% drop in the Americas offset by 6% international growth. The weak outlook contributed to a sharp 23% drop in Lululemon’s stock in after-hours trading, adding to a year-to-date decline of 13%.
Lululemon’s exposure to global supply chains — with 40% of products made in Vietnam and smaller portions in other Asian countries — makes it sensitive to tariffs. The company does not own its manufacturing facilities, relying instead on external suppliers. Gross margin for the quarter was 58.3%, slightly above expectations. However, the company now anticipates a full-year gross margin decrease of about 110 basis points due to rising tariffs, up from the earlier estimate of a 60-basis-point decline.
