On Thursday, Lululemon (LULU) exceeded Wall Street’s expectations for fiscal first-quarter earnings, but revised down its full-year earnings guidance due to challenges in the macroeconomic environment, including ongoing trade uncertainties. The company reported earnings per share (EPS) of $2.60, beating the anticipated $2.58, and revenue of $2.37 billion, slightly above the expected $2.36 billion. However, it reduced its full-year earnings outlook, now expecting EPS between $14.58 and $14.78, down from the prior forecast of $14.95 to $15.15.
Tariffs and Consumer Caution Impact Guidance
Despite the positive first-quarter results, CEO Calvin McDonald acknowledged that U.S. consumer spending remains cautious and intentional. In response to the pressures of tariffs, Lululemon plans “strategic price increases” on a select portion of their products, which will begin rolling out in the second half of the current quarter. CFO Meghan Frank indicated that the price hikes will be modest, aiming to mitigate the impact of tariffs. Shares of Lululemon dropped approximately 20% on Friday in response to the updated forecast.
Key Metrics and Revised Outlook
For the fiscal first quarter, Lululemon’s net income stood at $314 million, or $2.60 per share, compared to $321 million, or $2.54 per share, in the same period last year. The company’s revenue rose to $2.37 billion from $2.21 billion in Q1 2024. Looking ahead, Lululemon expects second-quarter revenue between $2.54 billion and $2.56 billion and anticipates full-year fiscal 2025 revenue in the range of $11.15 billion to $11.3 billion. Comparable sales grew by 1% year over year, trailing the 3% growth analysts had forecasted.
Impact of Tariffs and Supply Chain Considerations
During the earnings call, Frank emphasized that the company’s outlook assumes ongoing tariff impacts, with the 30% incremental tariff on Chinese goods and a 10% levy on imports from other countries. Lululemon’s supply chain remains largely global, with 40% of products manufactured in Vietnam, and the company remains reliant on third-party suppliers for production and fabric sourcing.
Full-Year Gross Margin Forecast Adjusted
Lululemon also revised its gross margin forecast for the full year, now expecting a decrease of 110 basis points compared to 2024, down from the previous estimate of a 60-basis point decline. This adjustment reflects the growing pressure from tariffs, with higher costs being passed along to consumers through strategic pricing.
