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Lululemon Athletica Today LULU Lululemon Athletica $293.06 -48.47 (-14.19%) 52-Week Range $226.01 ▼ $423.32 P/E Ratio 21.16 Price Target $380.72 Add to Watchlist Lululemon NASDAQ: LULU shares dropped precipitously following its 2025 guidance because it was weak. However, the guidance calls for growth and weakness, not because of some operational shortcoming but rather the economy at large and general headwind for retailers. Lululemon has no control over the macroeconomic situation, only its operations, whic ...

Core Insights - Lululemon Athletica is focusing on new products and community events to attract customers amid inflation concerns and a cautious consumer environment [1][2] - The company has seen a positive response to its new product innovations, reflected in increased units per transaction and average order size [2] - Lululemon is maintaining a strong pipeline of innovation with new product introductions, including a new training fabric and versatile casual pants [3] - Community engagement events are designed to build customer loyalty and attract new customers, utilizing stores as hubs for fitness classes and exclusive experiences [4] - The company added 56 net new stores last year, including 14 from the acquisition of its Mexico operations, indicating growth in its physical presence [5] - Store revenue growth outpaced digital revenue growth, with store revenue increasing by 12% and digital revenue by 4% [6] - The company has accounted for a 20 basis point headwind in its guidance due to current tariffs on imports from China and Mexico [6] - Lululemon is actively monitoring the macro environment and is prepared to adjust its cost structure and pricing strategies if necessary [7]

Core Viewpoint - Lululemon Athletica's shares fell significantly following the release of its fiscal fourth-quarter earnings, which, despite beating expectations, provided disappointing guidance for future growth amid concerns over consumer spending and macroeconomic pressures [1][4]. Financial Performance - In the fiscal fourth quarter ended on February 2, Lululemon reported revenue of $3.6 billion, an increase of 13%, and earnings per share of $6.14, up 16%, both exceeding expectations [2]. - The reported revenue growth was partially inflated due to an extra week in the fourth quarter compared to the previous year; without this, revenue growth would have been approximately 8% [2]. Future Guidance - Management forecasted a deceleration in growth for the first quarter, expecting growth between 6% and 7% [3]. - For the full year 2025, Lululemon projected revenue between $11.15 billion and $11.3 billion, indicating growth of 5% to 7%, or 7% to 8% when excluding the impact of the extra week in 2024 [3]. Market Concerns - The growth forecast, while not overly negative given current macroeconomic conditions, fell short of analysts' expectations, raising concerns about the sustainability of growth, particularly as U.S. comparable store sales were flat and much of the growth was driven by China [4]. - CEO Calvin McDonald highlighted consumer caution due to inflation and economic concerns, leading to slower traffic in the U.S. retail sector [4]. Valuation and Investment Considerations - Following the stock's decline, Lululemon trades at 19.5 times the current year's guided earnings expectations of $15.05, which is at the lower end of its five-year forward P/E range, historically averaging around 30 times [5]. - The company is now more mature, which may justify a lower valuation multiple; however, its near-term success will depend on U.S. consumer sentiment and China's willingness to purchase North American apparel brands [6].

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Core Viewpoint - Lululemon is experiencing significant stock market losses due to macroeconomic challenges, including tariffs imposed by President Trump and declining consumer confidence [1][3]. Stock Performance - Lululemon's stock fell 15% to approximately $290, marking its lowest intraday price since October and the worst percentage loss since last March [2]. - If the losses persist, this would represent Lululemon's second-largest drop in the last five years and the ninth-steepest decline since its IPO in 2007 [2]. Financial Guidance and Market Reaction - Despite exceeding Wall Street earnings forecasts for the last quarter, Lululemon's guidance of about 3% bottom line growth for 2025 raised concerns among investors, as it would be the worst growth since 2020 [3]. - The company's CEO noted a cautious consumer environment and slower traffic in U.S. retail stores [4]. Tariff Impact - The financial guidance from Lululemon only accounts for a minor slowdown of 0.2 percentage points due to tariffs, while Wall Street anticipates a more significant impact [5]. - Bank of America analysts reduced their 2025 profit forecast for Lululemon by 2% due to margin pressures from tariffs [5]. Consumer Sentiment and Economic Outlook - Analysts predict that continued tariffs and rising inflation could lead to Lululemon's first annual sales decline since at least 2006 [6]. - The macroeconomic environment is contributing to a more cautious consumer sentiment, with indicators showing a significant drop in consumer confidence [10]. Supply Chain Concerns - Lululemon sources about 40% of its products from Vietnam, making it vulnerable to potential tariffs on Vietnamese goods, which could exacerbate the company's challenges [8]. Industry Context - Other major retailers, including Walmart and Ford, have also expressed concerns about the negative impacts of tariffs on their businesses, indicating a broader industry challenge [11].

Company Performance - Lululemon athletica inc. reported fourth-quarter fiscal 2024 revenues of $3.61 billion, a 13.6% year-over-year increase, surpassing the Zacks Consensus Estimate of $3.58 billion [5] - The company's earnings per share (EPS) for the fourth quarter was $6.14, reflecting a 16.1% increase from the adjusted EPS of $5.29 in the prior-year quarter, and exceeding the Zacks Consensus Estimate of $5.85 [2] - The company has achieved a 19% revenue compound annual growth rate (CAGR) since 2021, with adjusted EPS growing at a 23% CAGR [3] Sales and Revenue Breakdown - Net revenues in the Americas grew 7% on a reported basis and 8% on a constant-dollar basis, while international revenues surged 38% (40% on a constant-dollar basis) [5] - Total comparable sales rose 3% year over year, with a 20% increase internationally [6][8] - Digital revenues contributed $1.8 billion, accounting for 50% of total revenues, with an 8% year-over-year improvement [8] Profitability Metrics - Gross profit increased 15% year over year to $2.2 billion, with a gross margin expansion of 100 basis points to 60.4% [9] - Operating income rose 14% year over year to $1 billion, with an operating margin of 28.9%, expanding 40 basis points [12] Future Outlook - For fiscal 2025, Lululemon anticipates net revenues of $11.15-$11.3 billion, indicating 5-7% year-over-year growth [23] - The company expects a gross margin decline of 60 basis points year over year due to fixed cost deleverage and foreign exchange headwinds [24] - Lululemon plans to open 40-50 net new company-operated stores in fiscal 2025, aiming for a 10% increase in square footage [15] Financial Position - As of the end of fiscal 2024, Lululemon had cash and cash equivalents of $2 billion and stockholders' equity of $4.3 billion [16] - The company repurchased 5.1 million shares for $1.6 billion in fiscal 2024, with $1.3 billion remaining under its current share repurchase authorization [17] Strategic Initiatives - Lululemon continues to implement its Power of Three X2 growth strategy, focusing on enhancing brand awareness and supporting international growth [3][25] - The company is entering new markets, including Italy and several countries through a franchise model, while optimizing existing store operations [14][15]

Core Insights - Lululemon reported a strong fourth quarter for 2024, with revenue growth of 13% and earnings per share increasing by 16%, surpassing analyst expectations [2][3] - Despite the solid performance, the company's guidance for fiscal 2025 is weak, projecting revenue growth of only 5% to 7%, which is below analyst consensus [3][4] - Increased competition and a challenging macroeconomic environment are significant concerns for Lululemon moving forward [4][6] Financial Performance - Q4 2023 revenue was $3.21 billion, increasing to $3.61 billion in Q4 2024, representing a 13% growth [1] - Earnings per share rose from $5.29 to $6.14, marking a 16% increase [1] - Comparable sales grew by 12% in Q4 2024, but this was a decline of 9 percentage points compared to the previous year [1] Market Reaction - Following the earnings report, Lululemon's shares fell approximately 6% in after-hours trading due to the disappointing guidance for 2025 [5] - The stock has shown volatility over the past few years, with little change compared to three years ago [5] Competitive Landscape - Lululemon faces increasing competition from newer brands like Vuori and Alo Yoga, which are impacting its market position [4][6] - International revenue grew significantly by 38% year over year, driven by new store openings and a 20% rise in comparable sales [2][6] - The company needs to focus on revitalizing comparable sales growth in the U.S. market [6]

Financial Data and Key Metrics Changes - In Q4, total revenue excluding the 53rd week increased by 8% or 9% on a constant currency basis, reaching $3.6 billion [10][47] - Operating margin increased by 40 basis points to 28.9%, and earnings per share rose by 16% [11] - For the full year 2024, total revenue was $10.6 billion, with an adjusted operating margin increase of 50 basis points to 23.7% and adjusted earnings per share growth of 15% [12][45] - The company repurchased $332 million of stock in Q4, totaling $1.6 billion for the year, reflecting confidence in long-term prospects [11][54] Business Line Data and Key Metrics Changes - In Q4, men's revenue increased by 12%, women's by 6%, and accessories and other grew by 9% [49] - The outerwear and second layers performed well for both women and men, with strong guest response to new product launches [14][19] Market Data and Key Metrics Changes - In the Americas, revenue increased by 2% or 3% in constant currency, with comparable sales flat; Canada saw an 11% increase, while the U.S. increased by 1% [47] - China Mainland revenue surged by 38% or 39% in constant currency, with comparable sales up by 27% [47] - The Rest of World revenue grew by 22% or 26% in constant currency, with comparable sales increasing by 17% [47] Company Strategy and Development Direction - The company aims to increase brand awareness, particularly in markets like France, Germany, and Japan, where awareness is currently low [24][25] - Plans for 2025 include a 10% growth in square footage through new store openings and optimizations, with a focus on international expansion [39][57] - The product pipeline for 2025 includes several new innovations and updates to existing franchises, aiming to drive guest acquisition and loyalty [22][39] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a cautious consumer environment due to macroeconomic factors, impacting traffic but noted positive responses to new product offerings [36][37] - The company expects modest growth in U.S. revenue for 2025, with a focus on controlling internal factors while navigating external challenges [38][41] - Confidence remains in the Power of Three x2 strategy, with ongoing investments in brand awareness and product innovation [60][68] Other Important Information - The company ended Q4 with approximately $2 billion in cash and cash equivalents, with inventory increasing by 9% [54] - Capital expenditures for Q4 were $235 million, primarily for business growth investments [53] Q&A Session Summary Question: Clarification on modest U.S. revenue growth expectations - Management defined modest growth as low-single-digit to mid-single-digit for the U.S., with Q1 not trending materially differently than Q4 [78][79] Question: Marketing strategy effectiveness and customer acquisition - Management reported strong engagement from community-based activations and noted thousands of guests registered for events, indicating effective customer acquisition strategies [85][88] Question: Tariff impact and mitigation strategies - Current guidance includes a 20 basis point headwind from tariffs, with ongoing monitoring and potential pricing adjustments if necessary [91] Question: International growth plans and activations - Management emphasized a customized approach to activations based on market maturity, with plans for significant engagement in new markets like Japan and South Korea [98] Question: Margin guidance and flexibility in cost structure - Management indicated that FX and tariff headwinds account for over 50% of the expected 100 basis point decline in operating margin for 2025, with flexibility in SG&A depending on sales performance [100][122]

Market Overview - Markets experienced volatility, ending lower with the Dow down -155 points (-0.37%), S&P 500 down -18 points (-0.33%), Nasdaq down -94 points (-0.53%), and Russell 2000 down -0.39% [1] - The uncertainty surrounding tariffs and their potential consequences is hindering market advancement, with current levels down -2% to -4% from a month ago [2] Housing Market - Pending Home Sales increased by +2.0%, surpassing the +1.0% expected by analysts, recovering from a previous decline of -4.6% [3] - Year-over-year, pending home sales are down -3.6%, with regional performance showing the South up +6.2%, Midwest up +0.7%, Northeast down -0.9%, and West down -3.0% [3][4] lululemon athletica (LULU) Performance - lululemon reported Q4 earnings of $6.14 per share, exceeding the $5.85 consensus and $5.29 from the previous year, with revenues of $3.61 billion, slightly above the expected $3.58 billion [5] - Comparable sales increased by +3% overall, with the Americas flat and International up +22%, but guidance for the current quarter and full fiscal year was disappointing, leading to a -7.5% drop in shares during late trading [6] - The company's cautious outlook is influenced by tariff policies, contributing to a year-to-date decline of -10% in stock value [6]