LULU Lululemon reported a 7% year-over-year increase in Q1 revenue, reaching $2.4 billion—matching expectations. Earnings per share came in at $2.60, slightly above estimates, and gross margins improved to 58%. International sales surged 19%, driven by a 21% rise in mainland China. However, U.S. comparable sales dropped 2% due to weaker store traffic. Overall same-store sales increased only 1%, falling short of forecasts. Management highlighted positive consumer response to new product lines such as Daydrift and No Line Align. The company reaffirmed its full-year revenue growth outlook of 5% to 7%, but lowered its earnings forecast to approximately $14.68 (down from $15.05), below analyst expectations.
Investors reacted negatively to the sluggish U.S. performance and growing cost concerns tied to new tariffs, causing the stock to fall over 20%. Lululemon now anticipates a 30% tariff on Chinese imports and a 10% duty on others, which could pressure profit margins. Although the company plans moderate price hikes and supply chain improvements to cushion the blow, these strategies aren’t expected to significantly help until the second half of the year. As American consumers become more cautious and growth slows, challenges are mounting. Nevertheless, Lululemon is banking on international expansion, newer product categories like running and tennis, and ongoing innovation to drive its future growth.