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lulhemon Defeated Wall Street’s expectations of fiscal first-quarter fiscal earnings, but cut its full-year revenue guidance on the grounds of a “dynamic macro environment.”
"When the company was slowing down the U.S. economy, the company was upset about the tariffs on the U.S. economy," CEO Calvin McDonald said in a press release, "We intend to use our strong financial situation and competitive advantage to play the offense, while we continue to invest in growth opportunities before us. ”
He said on a call with analysts that he was “dissatisfied” with our growth and said our consumers were cautious and intentional about their buying decisions.
Chief Financial Officer Meghan Frank added that the brand plans to adopt “strategic price increases, searching item by item in our various commodities” to mitigate the effectiveness of tariffs.
“It will be a price increase for a small part of our classification and it will be very suitable in nature,” she said.
The apparel company's shares plummeted about 23% in expansion trading.
How did the company perform in the first quarter compared to what Wall Street expected for the quarter ended May 4 to May 4, according to an LSEG survey of analysts.
The company cuts its full-year revenue guidance. It expects its full-year earnings per share to be between $14.58 and $14.78. Previously, it expected full-year earnings per share to be between $14.95 and $15.15 in the year. According to LSEG, analysts expect earnings per share of $14.89.
Lululemon's report comes after a series of retailers reduced or withdrawn guidance and said prices were raised due to uncertainty over President Donald Trump's tariff regime. Retailers including Abercrombie & Fitch and Macy's cut their profit outlook, while others including the American Eagle Outfitters have fully received full-year guidance.
In the sportswear category, Lululemon's competitors, especially Gap, which owns Athleisure Brand Athleta, reported last week that it expects tariffs to impact its operations of $100 million to $150 million. Nike told CNBC last month that it will start raising prices on a wide range of products, although it does not specify whether tariffs are the reason for hiking.
During Thursday's earnings call, McDonald's acknowledged the uncertainty of the business by tariffs, but said he believes the brand is "better than most" and can be browsed in the current environment.
Lululemon reported net income for the first quarter of fiscal quarter of $314 million, or $2.60 per share, while net income was $321 million, or $2.54 per share.
Revenue rose to $2.37 billion in the first quarter, up from $2.21 billion in the same period in 2024.
Lululemon expects second-quarter revenue to be between $2.54 billion and $2.56 billion. It also expects revenue for the full year of fiscal 2025 to be $1.15 billion to $11.3 billion, unchanged from the previous forecast. Wall Street analysts expect revenue in the second quarter to be $2.56 billion, and full-year revenue of $11.24 billion, according to LSEG.
According to LSEG, the ActiveWear company expects earnings per share in the second quarter to be between $2.85 and $2.90, while Wall Street expects $3.29.
Frank said the company's prospects assume China's current incremental tariffs of 30% and a 10% tax in the rest of the countries where retailers are from.
According to the company's annual report, in 2024, 40% of Vietnam's Lululemon products are produced in Vietnam, 17% in Cambodia, 11% in Sri Lanka, 11% in Indonesia, 7% in Bangladesh, and the rest are in other regions. Lululemon does not own or operate any manufacturing facilities, nor does it rely on suppliers that produce and provide the fabrics of its products, the report said.
According to Streetaccount, sales in the quarter rose 1% year-on-year compared to Wall Street's 3% forecast. This figure includes a 2% decline in the Americas and a 6% increase internationally.
According to StreetAccount, the gross margin of 57.7% was 58.3% higher than analysts' expectations.
However, Frank said on the revenue call that Lululim expects gross margin to drop by about 110 basis points for the full year, rather than 2024, which is lower than its previous guidance of a 60 basis point decline. The difference, she said, is driven primarily by increased tariffs.
Lulu shares fell about 13% year by year as of Thursday's end.