The company now expects annual profit between $14.58 and $14.78 per share, compared with previous guidance of $14.95-$15.15.
Lululemon has cut annual profit guidance and said second-quarter revenue will be below estimates as it grapples with weaker demand, more competition, and an economic slowdown due to uncertainty over US tariff policy, as consumers curb spending.
“We experienced lower store traffic in the Americas, partially reflective of economic uncertainty, inflationary pressures, lower consumer confidence, and changes in discretionary spending,” the athleisure company said. Lululemon shares fell 21 percent in after-market trading on the news.
“My sense is that in the US, consumers remain cautious right now, and they are being very intentional about their buying decisions,” said CEO Calvin McDonald.
The company now expects annual profit between $14.58 and $14.78 per share, compared with previous guidance of $14.95-$15.15. Second-quarter profit estimates were cut to $2.85-$2.90 a share, compared with estimates of $3.29.
Chief financial officer Meghan Frank added that the brand is planning “strategic price increases … on a small portion of our assortment” to mitigate the tariffs’ impact, but said they would be “modest”. She said full-year gross margins should fall by around 110 basis points from prior guidance of a 60-point drop due to increased tariffs. The company also said it will cut costs and negotiate with vendors. Last year, 40 percent of its products were made in Vietnam, and 28 percent of fabrics were from China.
China, a key market
For the first quarter, international sales, driven in large part by China, helped Lululemon post a 7 percent rise in net revenue to a better-than-expected $2.37 billion, compared with estimates of $2.335 to $2.355 billion. China Mainland net revenue increased 22% on a constant currency basis to $368.1 million, or 16 percent of group sales, as the company opened three new stores during the period. Like-for-like sales were up 8%.
Americas’ net revenue increased 4 percent on a constant dollar basis to $1.7bn, but formed 71 percent of group sales, slightly down from 73 percent in 2024. Rest of World net revenue increased 17% on a constant dollar basis to $328 million. Comparable sales rose 7%.
Operating income rose to $438.6 million from $432.6 million, while net income fell 2.18 percent to $314 million. Gross margin increased 60 basis points to 58.3 percent due to lower product costs, higher average unit retail and lower discounting, partially offset by higher freight costs and forex headwinds.
Store revenues rose
Store revenue rose 8 percent, while digital sales were up 7 percent. Women’s apparel revenue was up 7 percent and men’s 8 percent, while sales of accessories and other items were up 8 percent.
For the second quarter, Lululemon expects net revenue growth of 7-8% to $2.53-$2.560 billion, but below estimates of $2.568 billion. It reiterated full year net sales guidance of $11.15-$11.3 billion, representing growth of 5-7%, or 7-8% excluding the 53rd week of 2024.
