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lululemon Q1 Earnings & Revenues Beat, Stock Dips on Cost Outlook
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Key Takeaways
lululemon posted Q1 EPS of $2.60 and revenues of $2.37B, topping estimates and rising year over year.
Growth was fueled by strong international sales and product innovation, especially in China.
Despite solid results, the LULU stock fell 22.4% on a higher cost outlook from tariffs and currency headwinds.
lululemon athletica inc. (LULU - Free Report) reported first-quarter fiscal 2025 results, wherein revenues and earnings beat the Zacks Consensus Estimate and improved year over year. The company’s top-line growth was fueled by broad-based gains across channels, categories and key markets, particularly the United States, underscoring the continued strength and adaptability of its business model. Positive response to its product innovations, newness and brand activations aided its performance.
lululemon’s fiscal first-quarter earnings per share (EPS) of $2.60 increased 2.4% compared with $2.54 reported in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of $2.59. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Shares of lululemon have dropped 22.4% in the after-hours trading session yesterday despite the better-than-expected first-quarter fiscal 2025 performance. The decline in share price is mainly due to adverse currency rates and the looming effects of the rising tariffs on imports, which are expected to result in elevated costs, hurting the bottom line and margins. This Zacks Rank #3 (Hold) company has seen its shares decline 3.9% in the past three months compared with the Textile - Apparel industry’s fall of 2.4%.
Image Source: Zacks Investment Research
LULU’s Q1 Earnings Overview
The Vancouver, Canada-based company’s quarterly revenues advanced 7% year over year to $2.37 billion and outpaced the Zacks Consensus Estimate of $2.36 billion. On a constant-dollar basis, net revenues improved 8% year over year in the fiscal first quarter. Net revenues grew 3% in the Americas on a reported basis (4% on a constant-dollar basis) and 19% internationally (up 20% on a constant-dollar basis). Management highlighted that the fiscal first quarter revenue growth was at the upper end of its 6-7% year-over-year guidance range.
Total comparable sales (comps) rose 1% year over year. Comps in the Americas declined 2% on a reported basis and 1% in constant dollars. Internationally, comps increased 6% and rose 7% on a constant-dollar basis.
On a country basis, revenues increased 4% year over year (9% in constant currency) in Canada and 2% in the United States, 21% in Mainland China (22% in constant currency) and 16% in the Rest of the World (17% in constant currency). Comps improved 8% in Mainland China and 7% in the Rest of the World in the fiscal first quarter.
lululemon athletica inc. Price, Consensus and EPS Surprise
In the store channel, the company’s total sales increased 8% on a constant-dollar basis. Digital revenues improved 6% year over year, contributing $961 million, or 40%, to the total revenues.
The gross profit improved 8% year over year to $1.4 billion. Also, the gross margin expanded 60 basis points (bps) to 58.3%, primarily driven by a 130-bps improvement in the product margin, supported by lower product costs, reduced damages and better markdowns. This was partially offset by increased airfreight expenses, 20-bps negative impacts of foreign exchange and 50-bps of net deleverage on fixed costs.
Management also noted that gross margin growth in the quarter was ahead of its guidance, mainly driven by lower product cost leverage on fixed costs and slightly better markdowns. We expected the gross margin to contract 50 bps year over year to 57.2% for the fiscal first quarter.
SG&A expenses of $942.9 million increased 11.9% from the year-ago quarter. SG&A expenses, as a percentage of net revenues, of 39.8% rose 170 bps from 38.1% in the prior-year quarter. The increase in SG&A expense rate was above the anticipated deleverage of 120 bps outlined by the company due to the negative impacts of FX revaluation loss.
Our model predicted SG&A expenses to rise 7.1% year over year for the fiscal first quarter, with a 20-bps increase in the SG&A expense rate to 38.3%.
The operating income rose 1% year over year to $438.6 million in the fiscal first quarter. The operating margin of 18.5% expanded 110 bps year over year. Our model predicted a 2.4% year-over-year increase in adjusted operating income. We estimated the operating margin to decline 80 bps year over year to 18.8%.
Snapshot of lululemon’s Store Plans
In first-quarter fiscal 2025, LULU opened three net new stores, including five store openings and two closures. Additionally, the company completed four optimizations. As of May 4, 2025, it operated 770 stores.
In the second quarter of fiscal 2025, the company expects to open 14 net new company-operated stores and complete nine store optimizations. For fiscal 2025, lululemon anticipates 40-45 net new company-operated stores. It also expects to complete 40 co-located optimizations. LULU expects overall square footage growth in the low-double-digits for fiscal 2025. Store openings in fiscal 2025 will include 10-15 in the Americas. The rest of the store openings in fiscal 2025 are expected to occur in the international markets, primarily in China.
LULU’s Other Financial Details
lululemon exited first-quarter fiscal 2025 with cash and cash equivalents of $1.3 billion. The company had $393.4 million of capacity under its committed revolving credit facility and stockholders’ equity of $4.3 billion. Its inventories rose 17% year over year to $1.7 billion, with inventory units improving 16%. The capital expenditure was $152 million in the fiscal first quarter.
In the fiscal first quarter, lululemon repurchased 1.4 million shares for $430.4 million at an average price of $316. As of May 4, 2025, LULU had $1.1 billion remaining under its current share repurchase authorization.
lululemon’s Targets for Q2 & FY25
LULU is excited about building on its momentum in fiscal 2025 while staying adaptable in the face of macroeconomic uncertainties. With significant opportunities in the pipeline, the company remains confident in its ability to drive sustainable growth and deliver long-term value for all stakeholders.
As a result, it reiterated its revenue guidance for fiscal 2025. However, the company anticipates higher costs and ongoing uncertainty due to the impacts of increased tariffs on imports from China and Mexico, which are likely to result in higher costs in the quarters ahead.
For fiscal 2025, LULU anticipates net revenues of $11.15-$11.3 billion, indicating 5-7% year-over-year growth. Excluding the 53rd week in 2024, revenues are expected to rise 7-8%. The company’s guidance assumes positive revenue growth across all regions, including a low to mid-single-digit increase in North America, a 25-30% rise in Mainland China and a nearly 20% improvement in the Rest of the World. Growth across all markets is expected to be driven by the company’s unique product and innovative solutions for guests in the athletic and lifestyle product categories.
lululemon expects a 110-bps year-over-year decline in the gross margin compared with the previous guidance of a 60-bps decline. The variance from the prior guidance is mainly due to an additional 50 bps of deleverage, led by increased tariffs, partly offset by its enterprise-wide efforts to mitigate these costs and slightly higher markdowns. The higher tariffs are expected to be driven by 30% incremental tariffs on China and an incremental 10% on the remaining countries from where LULU’s products are sourced.
The company has identified several mitigation strategies to offset these tariff cost headwinds, which are expected to be the most effective in the second half of fiscal 2025.
The SG&A expense rate is expected to rise 50 bps year over year for fiscal 2025, almost in line with the prior guidance, driven by ongoing investments into its Power of Three x2 plan and currency headwinds. Throughout fiscal 2025, the company plans to invest in marketing and brand building to enhance awareness and attract guests, support international growth and market expansion, and strengthen its technology and data analytics capabilities.
LULU expects the fiscal 2025 operating margin to contract 160 bps year over year. The company projects an EPS of $14.95-$14.78, suggesting an increase from the $14.64 reported in fiscal 2024. It anticipates an effective tax rate of 30% for fiscal 2025. lululemon expects a capital expenditure of $740-$760 million for fiscal 2025.
For the second quarter of fiscal 2025, management anticipates net revenues of $2.535-$2.56 billion, indicating 7-8% year-over-year growth. The company expects the gross margin to decline 20 bps year over year, driven by elevated occupancy and depreciation, higher tariff rates, slightly higher markdowns and adverse currency rates.
SG&A, as a percentage of sales, is expected to deleverage 170-190 bps year over year, driven by higher foundational investments and associated depreciation, as well as strategic initiatives to enhance brand awareness and support growth. The operating margin for the fiscal second quarter is expected to decline 380 bps year over year. Notably, it reported operating margin growth of 110 bps in the prior-year quarter. The variance is mainly due to the impacts of external factors like tariffs and currency headwinds.
EPS for the fiscal second quarter is expected to be $2.85-$2.90, whereas it reported EPS of $3.15 in the prior-year quarter. LULU estimates an effective tax rate of 30% for the fiscal second quarter. The company anticipates dollar inventory to increase in the low 20s in the fiscal second quarter and inventory per unit to increase in the low-double-digits, driven by higher tariffs and adverse currency rates. The company expects inventory growth for the rest of the fiscal year to follow a similar pattern.
Solid Picks in LULU’s Broader Industry
We have highlighted three better-ranked stocks from the same industry, namely Birkenstock Holding PLC (BIRK - Free Report) , Urban Outfitters (URBN - Free Report) and adidas AG (ADDYY - Free Report) .
The Zacks Consensus Estimate for Birkenstock’s current fiscal-year sales and earnings indicates growth of 21.6% and 36.7%, respectively, from the year-ago period’s reported figure. BIRK has a trailing four-quarter earnings surprise of 7.8%, on average.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor, and gift products. URBN sports a Zacks Rank #1 at present.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year sales and earnings indicates growth of 8% and 20.9%, respectively, from the year-ago period’s reported figures. URBN has a trailing four-quarter earnings surprise of 29%, on average.
adidas is a leading brand in the sporting goods market with strong positions in footwear, apparel and hardware. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for adidas’ current fiscal-year sales and EPS indicate growth of 12.3% and 86.1%, respectively, from the year-ago period’s reported figures. ADDYY has a trailing four-quarter negative earnings surprise of 48%, on average.
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lululemon Q1 Earnings & Revenues Beat, Stock Dips on Cost Outlook
Key Takeaways
lululemon athletica inc. (LULU - Free Report) reported first-quarter fiscal 2025 results, wherein revenues and earnings beat the Zacks Consensus Estimate and improved year over year. The company’s top-line growth was fueled by broad-based gains across channels, categories and key markets, particularly the United States, underscoring the continued strength and adaptability of its business model. Positive response to its product innovations, newness and brand activations aided its performance.
lululemon’s fiscal first-quarter earnings per share (EPS) of $2.60 increased 2.4% compared with $2.54 reported in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of $2.59. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Shares of lululemon have dropped 22.4% in the after-hours trading session yesterday despite the better-than-expected first-quarter fiscal 2025 performance. The decline in share price is mainly due to adverse currency rates and the looming effects of the rising tariffs on imports, which are expected to result in elevated costs, hurting the bottom line and margins. This Zacks Rank #3 (Hold) company has seen its shares decline 3.9% in the past three months compared with the Textile - Apparel industry’s fall of 2.4%.
Image Source: Zacks Investment Research
LULU’s Q1 Earnings Overview
The Vancouver, Canada-based company’s quarterly revenues advanced 7% year over year to $2.37 billion and outpaced the Zacks Consensus Estimate of $2.36 billion. On a constant-dollar basis, net revenues improved 8% year over year in the fiscal first quarter. Net revenues grew 3% in the Americas on a reported basis (4% on a constant-dollar basis) and 19% internationally (up 20% on a constant-dollar basis). Management highlighted that the fiscal first quarter revenue growth was at the upper end of its 6-7% year-over-year guidance range.
Total comparable sales (comps) rose 1% year over year. Comps in the Americas declined 2% on a reported basis and 1% in constant dollars. Internationally, comps increased 6% and rose 7% on a constant-dollar basis.
On a country basis, revenues increased 4% year over year (9% in constant currency) in Canada and 2% in the United States, 21% in Mainland China (22% in constant currency) and 16% in the Rest of the World (17% in constant currency). Comps improved 8% in Mainland China and 7% in the Rest of the World in the fiscal first quarter.
lululemon athletica inc. Price, Consensus and EPS Surprise
lululemon athletica inc. price-consensus-eps-surprise-chart | lululemon athletica inc. Quote
In the store channel, the company’s total sales increased 8% on a constant-dollar basis. Digital revenues improved 6% year over year, contributing $961 million, or 40%, to the total revenues.
The gross profit improved 8% year over year to $1.4 billion. Also, the gross margin expanded 60 basis points (bps) to 58.3%, primarily driven by a 130-bps improvement in the product margin, supported by lower product costs, reduced damages and better markdowns. This was partially offset by increased airfreight expenses, 20-bps negative impacts of foreign exchange and 50-bps of net deleverage on fixed costs.
Management also noted that gross margin growth in the quarter was ahead of its guidance, mainly driven by lower product cost leverage on fixed costs and slightly better markdowns. We expected the gross margin to contract 50 bps year over year to 57.2% for the fiscal first quarter.
SG&A expenses of $942.9 million increased 11.9% from the year-ago quarter. SG&A expenses, as a percentage of net revenues, of 39.8% rose 170 bps from 38.1% in the prior-year quarter. The increase in SG&A expense rate was above the anticipated deleverage of 120 bps outlined by the company due to the negative impacts of FX revaluation loss.
Our model predicted SG&A expenses to rise 7.1% year over year for the fiscal first quarter, with a 20-bps increase in the SG&A expense rate to 38.3%.
The operating income rose 1% year over year to $438.6 million in the fiscal first quarter. The operating margin of 18.5% expanded 110 bps year over year. Our model predicted a 2.4% year-over-year increase in adjusted operating income. We estimated the operating margin to decline 80 bps year over year to 18.8%.
Snapshot of lululemon’s Store Plans
In first-quarter fiscal 2025, LULU opened three net new stores, including five store openings and two closures. Additionally, the company completed four optimizations. As of May 4, 2025, it operated 770 stores.
In the second quarter of fiscal 2025, the company expects to open 14 net new company-operated stores and complete nine store optimizations. For fiscal 2025, lululemon anticipates 40-45 net new company-operated stores. It also expects to complete 40 co-located optimizations. LULU expects overall square footage growth in the low-double-digits for fiscal 2025. Store openings in fiscal 2025 will include 10-15 in the Americas. The rest of the store openings in fiscal 2025 are expected to occur in the international markets, primarily in China.
LULU’s Other Financial Details
lululemon exited first-quarter fiscal 2025 with cash and cash equivalents of $1.3 billion. The company had $393.4 million of capacity under its committed revolving credit facility and stockholders’ equity of $4.3 billion. Its inventories rose 17% year over year to $1.7 billion, with inventory units improving 16%. The capital expenditure was $152 million in the fiscal first quarter.
In the fiscal first quarter, lululemon repurchased 1.4 million shares for $430.4 million at an average price of $316. As of May 4, 2025, LULU had $1.1 billion remaining under its current share repurchase authorization.
lululemon’s Targets for Q2 & FY25
LULU is excited about building on its momentum in fiscal 2025 while staying adaptable in the face of macroeconomic uncertainties. With significant opportunities in the pipeline, the company remains confident in its ability to drive sustainable growth and deliver long-term value for all stakeholders.
As a result, it reiterated its revenue guidance for fiscal 2025. However, the company anticipates higher costs and ongoing uncertainty due to the impacts of increased tariffs on imports from China and Mexico, which are likely to result in higher costs in the quarters ahead.
For fiscal 2025, LULU anticipates net revenues of $11.15-$11.3 billion, indicating 5-7% year-over-year growth. Excluding the 53rd week in 2024, revenues are expected to rise 7-8%. The company’s guidance assumes positive revenue growth across all regions, including a low to mid-single-digit increase in North America, a 25-30% rise in Mainland China and a nearly 20% improvement in the Rest of the World. Growth across all markets is expected to be driven by the company’s unique product and innovative solutions for guests in the athletic and lifestyle product categories.
lululemon expects a 110-bps year-over-year decline in the gross margin compared with the previous guidance of a 60-bps decline. The variance from the prior guidance is mainly due to an additional 50 bps of deleverage, led by increased tariffs, partly offset by its enterprise-wide efforts to mitigate these costs and slightly higher markdowns. The higher tariffs are expected to be driven by 30% incremental tariffs on China and an incremental 10% on the remaining countries from where LULU’s products are sourced.
The company has identified several mitigation strategies to offset these tariff cost headwinds, which are expected to be the most effective in the second half of fiscal 2025.
The SG&A expense rate is expected to rise 50 bps year over year for fiscal 2025, almost in line with the prior guidance, driven by ongoing investments into its Power of Three x2 plan and currency headwinds. Throughout fiscal 2025, the company plans to invest in marketing and brand building to enhance awareness and attract guests, support international growth and market expansion, and strengthen its technology and data analytics capabilities.
LULU expects the fiscal 2025 operating margin to contract 160 bps year over year. The company projects an EPS of $14.95-$14.78, suggesting an increase from the $14.64 reported in fiscal 2024. It anticipates an effective tax rate of 30% for fiscal 2025. lululemon expects a capital expenditure of $740-$760 million for fiscal 2025.
For the second quarter of fiscal 2025, management anticipates net revenues of $2.535-$2.56 billion, indicating 7-8% year-over-year growth. The company expects the gross margin to decline 20 bps year over year, driven by elevated occupancy and depreciation, higher tariff rates, slightly higher markdowns and adverse currency rates.
SG&A, as a percentage of sales, is expected to deleverage 170-190 bps year over year, driven by higher foundational investments and associated depreciation, as well as strategic initiatives to enhance brand awareness and support growth. The operating margin for the fiscal second quarter is expected to decline 380 bps year over year. Notably, it reported operating margin growth of 110 bps in the prior-year quarter. The variance is mainly due to the impacts of external factors like tariffs and currency headwinds.
EPS for the fiscal second quarter is expected to be $2.85-$2.90, whereas it reported EPS of $3.15 in the prior-year quarter. LULU estimates an effective tax rate of 30% for the fiscal second quarter. The company anticipates dollar inventory to increase in the low 20s in the fiscal second quarter and inventory per unit to increase in the low-double-digits, driven by higher tariffs and adverse currency rates. The company expects inventory growth for the rest of the fiscal year to follow a similar pattern.
Solid Picks in LULU’s Broader Industry
We have highlighted three better-ranked stocks from the same industry, namely Birkenstock Holding PLC (BIRK - Free Report) , Urban Outfitters (URBN - Free Report) and adidas AG (ADDYY - Free Report) .
Birkenstock manufactures and sells footwear products. BIRK flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Birkenstock’s current fiscal-year sales and earnings indicates growth of 21.6% and 36.7%, respectively, from the year-ago period’s reported figure. BIRK has a trailing four-quarter earnings surprise of 7.8%, on average.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor, and gift products. URBN sports a Zacks Rank #1 at present.
The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year sales and earnings indicates growth of 8% and 20.9%, respectively, from the year-ago period’s reported figures. URBN has a trailing four-quarter earnings surprise of 29%, on average.
adidas is a leading brand in the sporting goods market with strong positions in footwear, apparel and hardware. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for adidas’ current fiscal-year sales and EPS indicate growth of 12.3% and 86.1%, respectively, from the year-ago period’s reported figures. ADDYY has a trailing four-quarter negative earnings surprise of 48%, on average.