Core Insights - Lululemon reported a 7% year-over-year increase in global net revenue for Q1 FY2025, reaching $2.4 billion, with international revenue up 19% and revenue from mainland China up 21% [1] - CEO Calvin McDonald highlighted the company's resilient business model and strong product innovation, which contributed to growth across all channels and markets [1] - The company's inventory increased by 23% year-over-year, reaching $1.7 billion at the end of Q1 FY2025 [1] Revenue Projections - For Q2 FY2025, Lululemon expects net revenue to be between $2.535 billion and $2.560 billion, representing a year-over-year growth of approximately 7% to 8% [2] - The company projects full-year net revenue for FY2025 to be between $11.15 billion and $11.30 billion, reflecting a year-over-year growth of about 5% to 7% [2] - Expected diluted earnings per share for FY2025 is projected to be between $14.58 and $14.78 [2]

hapabapa While the quarter looks mostly okay, Lulu’s (NASDAQ:LULU) guide is the primary culprit for the stock to be down 20%+ after-hours today. Before we get into that, let me recap the quarter first, and then I will share some highlights from ...

Lululemon (LULU) reported $2.37 billion in revenue for the quarter ended April 2025, representing a year-over-year increase of 7.3%. EPS of $2.60 for the same period compares to $2.54 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $2.36 billion, representing a surprise of +0.59%. The company delivered an EPS surprise of +0.39%, with the consensus EPS estimate being $2.59.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how t ...

Core Viewpoint - Lululemon has cut its profit forecast for the year due to higher costs from US tariffs and weak demand for its new products, leading to a significant drop in its stock price [1][6]. Group 1: Financial Performance - The company now expects annual profit between $14.58 and $14.78 per share, down from previous expectations of $14.95 to $15.15 [6]. - Lululemon's revenue forecast for the second quarter is between $2.54 billion and $2.56 billion, which aligns with market expectations [8]. Group 2: Market Challenges - The company is facing lower store traffic in the Americas, attributed to economic uncertainty, inflation, lower consumer confidence, and changes in discretionary spending [1][3]. - Competitors like Alo Yoga and Vuori are gaining traction, making it difficult for Lululemon to boost sales despite new product offerings [3][8]. Group 3: Strategic Responses - Lululemon plans to implement modest price increases on a small portion of its product assortment and will negotiate with vendors to cut costs [4]. - In 2024, 40% of Lululemon's products were manufactured in Vietnam, and 28% of its fabrics were sourced from mainland China, indicating a diversification strategy in sourcing [4].

Company Performance - Lululemon reported quarterly earnings of $2.60 per share, exceeding the Zacks Consensus Estimate of $2.59 per share, and showing an increase from $2.54 per share a year ago, representing an earnings surprise of 0.39% [1] - The company posted revenues of $2.37 billion for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 0.59%, and up from $2.21 billion year-over-year [2] - Over the last four quarters, Lululemon has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Outlook - Lululemon shares have declined approximately 12.4% since the beginning of the year, while the S&P 500 has gained 1.5% [3] - The current consensus EPS estimate for the upcoming quarter is $3.27 on revenues of $2.56 billion, and for the current fiscal year, it is $14.72 on revenues of $11.19 billion [7] Industry Context - The Textile - Apparel industry, to which Lululemon belongs, is currently ranked in the bottom 28% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Lululemon's stock performance [5]

Financial Data and Key Metrics Changes - Total revenue increased by 7% or 8% on a constant currency basis to $2.4 billion in Q1 [9][25] - Gross margin increased by 60 basis points to 58.3% compared to the previous year [9][27] - Earnings per share were $2.6, exceeding expectations [9] - SG&A expenses were $943 million, or 39.8% of net revenue, compared to 38.1% in the same period last year [28] Business Line Data and Key Metrics Changes - Men's revenue increased by 8%, while women's revenue increased by 7% [26] - Accessories and other categories grew by 8% [26] - Comparable sales increased by 1% overall [25] Market Data and Key Metrics Changes - Revenue in North America grew by 3% or 4% in constant currency, with Canada seeing a 9% increase [25][10] - In China Mainland, revenue increased by 21% or 22% in constant currency, with comparable sales up by 8% [25][11] - The Rest of World segment saw a revenue increase of 16% or 17% in constant currency [25][11] Company Strategy and Development Direction - The company aims to maximize existing markets while expanding into new ones, with recent store openings in Denmark and Turkey [12] - Plans to enter Italy as a new company-operated market and Belgium and The Czech Republic under a franchise model later this year [12] - The focus remains on product innovation and community engagement through brand activations [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current environment, citing a strong balance sheet with $1.3 billion in cash and no debt [19] - The company is maintaining its revenue guidance for the full year, expecting growth of 7% to 8% [12][31] - Management acknowledged the cautious consumer behavior in the U.S. but noted market share gains in the premium athletic wear segment [11][72] Other Important Information - The company repurchased $430 million of stock during the quarter, demonstrating confidence in long-term prospects [9] - Inventory increased by 23% in dollar terms, impacted by tariffs and foreign exchange [30] Q&A Session Summary Question: Can you expand on the mitigation efforts regarding tariffs? - Management highlighted strategic price increases on select items and efficiency actions in sourcing as mitigation strategies [42][43] Question: What are the comp drivers and traffic trends? - Management noted a decline in store traffic but an increase in average transaction size, with no material changes in trends month to month [51][52] Question: How are tariffs impacting margins? - The company expects a decrease in operating margin due to tariffs, with mitigation efforts planned for the second half of the year [57][58] Question: What is the outlook for inventory and markdowns? - Management indicated that while markdowns have not yet been necessary, they are planning for potential increases due to macroeconomic concerns [64][82] Question: How is the competitive landscape affecting pricing strategies? - Management is monitoring promotional activity in the U.S. and anticipates a dynamic competitive market, particularly in the second half of the year [87][88]

Financial Data and Key Metrics Changes - Total revenue increased by 7% or 8% on a constant currency basis to $2.4 billion in Q1 [7][23] - Gross margin increased by 60 basis points to 58.3% compared to the previous year [7][26] - Earnings per share were $2.6, exceeding expectations [7] - SG&A expenses were $943 million, or 39.8% of net revenue, compared to 38.1% in the same period last year [27] Business Line Data and Key Metrics Changes - Men's revenue increased by 8%, while women's revenue increased by 7% [25] - Accessories and other categories grew by 8% [25] - Comparable sales increased by 1% overall [23] Market Data and Key Metrics Changes - In North America, revenue grew by 3% or 4% in constant currency, with Canada seeing a 9% increase [24][25] - In China Mainland, revenue increased by 21% or 22% in constant currency, with comparable sales up by 8% [25] - The Rest of World segment saw a revenue increase of 16% or 17% in constant currency [25] Company Strategy and Development Direction - The company aims to maximize existing markets while expanding into new ones, with recent store openings in Denmark and Turkey [10] - Plans to enter Italy as a new company-operated market and Belgium and The Czech Republic under a franchise model later this year [10] - Focus on product innovation and community engagement through brand activations [13][14] Management's Comments on Operating Environment and Future Outlook - Management remains confident in maintaining revenue guidance for the full year, expecting 7% to 8% growth [6][10] - The company is well-positioned to navigate tariff impacts and is focusing on strategic pricing and supply chain efficiencies [16][19] - Management acknowledges cautious consumer behavior in the U.S. but is optimistic about market share gains [9][70] Other Important Information - The company repurchased $430 million of stock during the quarter, reflecting confidence in long-term prospects [7] - Inventory increased by 23% in dollars and 16% in units, impacted by tariffs and foreign exchange [29] Q&A Session Summary Question: Can you expand on the mitigation efforts regarding guidance for the balance of the year? - Management plans to take strategic price increases on a small portion of the assortment and pursue sourcing efficiencies [42][43] Question: What are the comp drivers and traffic trends? - There was a decline in store traffic, but an uptick in average transaction size was noted [52][53] Question: How are tariffs impacting margins and pricing strategy? - Tariffs are expected to have a significant impact on margins, with strategic pricing adjustments planned [56][58] Question: What is the outlook for inventory and markdowns? - Inventory levels are being closely monitored, with markdowns expected to increase slightly due to macroeconomic concerns [64][80] Question: How is the company performing in China? - The company has 154 stores in China and plans to reach approximately 200, with strong double-digit growth expected [101][104]

Core Insights - Lululemon exceeded Wall Street expectations for fiscal first-quarter earnings but lowered its full-year earnings guidance due to a challenging macroeconomic environment [1][2] - The company's shares fell approximately 20% in after-hours trading following the announcement [1] Financial Performance - For the fiscal first quarter, Lululemon reported a net income of $314 million, or $2.60 per share, compared to $321 million, or $2.54 per share, in the same quarter last year [5] - First-quarter revenue increased to $2.37 billion, up from about $2.21 billion during the same period in 2024 [5] - Comparable sales rose 1% year over year, which was below the anticipated 3% [9] Earnings Guidance - The company revised its full-year earnings per share guidance to a range of $14.58 to $14.78, down from the previous range of $14.95 to $15.15 [2] - For the second quarter, Lululemon expects earnings per share between $2.85 and $2.90, compared to Wall Street's expectation of $3.29 [7] Revenue Expectations - Lululemon anticipates second-quarter revenue to be between $2.54 billion and $2.56 billion, while full-year revenue is expected to remain unchanged at $11.15 billion to $11.3 billion [6] Market Context - The company is facing challenges from tariffs and a slowing U.S. economy, similar to other retailers who have also reduced their guidance [3][4] - Competitors in the athleticwear sector, such as Gap and Nike, are also adjusting their strategies in response to tariff impacts [4] Manufacturing and Supply Chain - In 2024, 40% of Lululemon's products were manufactured in Vietnam, with significant portions also produced in Cambodia, Sri Lanka, Indonesia, and Bangladesh [8] - The company relies on suppliers for manufacturing and does not own any production facilities [8] Margins and Stock Performance - Gross margin for the quarter was 58.3%, exceeding the expected 57.7% [9] - As of the latest close, Lululemon's stock has declined about 13% year-to-date [9]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) For Q1 2025, lululemon reported net revenue of $2.37 billion (up 7%), a slight net income decrease to $314.6 million, and a significant shift to a $119.0 million net cash outflow from operations [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of May 4, 2025, total assets slightly decreased to $7.43 billion, with cash and equivalents falling to $1.33 billion and inventories rising to $1.65 billion Consolidated Balance Sheet Highlights (in thousands) | Account | May 4, 2025 | February 2, 2025 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | $1,325,272 | $1,984,336 | | Inventories | $1,652,091 | $1,442,081 | | Total current assets | $3,582,517 | $3,980,302 | | **Total Assets** | **$7,430,543** | **$7,603,292** | | **Current Liabilities** | | | | Accounts payable | $303,975 | $271,406 | | Total current liabilities | $1,572,385 | $1,839,630 | | **Total Liabilities** | **$3,140,973** | **$3,279,245** | | **Total Stockholders' Equity** | **$4,289,570** | **$4,324,047** | [Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Q1 2025 net revenue grew 7.3% to $2.37 billion and gross profit rose 8.5% to $1.38 billion, but net income slightly declined 2.1% to $314.6 million despite higher diluted EPS Q1 2025 Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 (ended May 4) | Q1 2024 (ended Apr 28) | YoY Change | | :--- | :--- | :--- | :--- | | Net revenue | $2,370,660 | $2,208,891 | +7.3% | | Gross profit | $1,383,126 | $1,275,068 | +8.5% | | Income from operations | $438,625 | $432,642 | +1.4% | | Net income | $314,572 | $321,421 | -2.1% | | Diluted earnings per share | $2.60 | $2.54 | +2.4% | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw a net cash outflow of $119.0 million from operations, a reversal from prior year, driven by inventory increases and $434.4 million in stock repurchases Q1 Cash Flow Summary (in thousands) | Activity | Q1 2025 (ended May 4) | Q1 2024 (ended Apr 28) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(118,954) | $127,524 | | Net cash used in investing activities | $(106,842) | $(131,537) | | Net cash used in financing activities | $(467,974) | $(328,628) | | **Decrease in cash and cash equivalents** | **$(659,064)** | **$(343,299)** | - The company repurchased **$434.4 million** of its common stock in Q1 2025, a significant increase from the **$299.5 million** repurchased in Q1 2024[16](index=16&type=chunk)[67](index=67&type=chunk) [Notes to the Unaudited Interim Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Consolidated%20Financial%20Statements) Notes detail accounting policies, credit facilities, stock-based compensation, segment performance with strong China Mainland growth, disaggregated revenue, and ongoing legal proceedings including a securities class action - The company operates through **770** company-operated stores as of May 4, 2025, an increase of 3 stores from the end of the prior fiscal year[20](index=20&type=chunk) - The company has a **$400.0 million** Americas revolving credit facility and a **300.0 million Chinese Yuan** facility, with no significant borrowings outstanding as of May 4, 2025[29](index=29&type=chunk)[30](index=30&type=chunk)[35](index=35&type=chunk) - A securities class action lawsuit was filed against the company and certain officers on August 8, 2024, alleging false and misleading statements. The company intends to defend the action vigorously[81](index=81&type=chunk) Q1 2025 Segment Performance (in thousands) | Segment | Net Revenue | Income from Operations | YoY Revenue Growth | | :--- | :--- | :--- | :--- | | Americas | $1,674,558 | $589,331 | 3.2% | | China Mainland | $368,101 | $153,635 | 21.2% | | Rest of World | $328,001 | $72,856 | 16.0% | Q1 2025 Net Revenue by Category (in thousands) | Category | Q1 2025 | Q1 2024 | YoY Growth | | :--- | :--- | :--- | :--- | | Women's apparel | $1,535,172 | $1,435,241 | +7.0% | | Men's apparel | $544,788 | $505,698 | +7.7% | | Accessories and other | $290,700 | $267,952 | +8.5% | Q1 2025 Net Revenue by Channel (in thousands) | Channel | Q1 2025 | Q1 2024 | YoY Growth | | :--- | :--- | :--- | :--- | | Company-operated stores | $1,153,107 | $1,070,525 | +7.7% | | E-commerce | $960,890 | $905,787 | +6.1% | | Other channels | $256,663 | $232,579 | +10.4% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported Q1 2025 net revenue growth of 7% to $2.4 billion, driven by international markets, while Americas comparable sales declined 2% and operating margin decreased due to higher SG&A expenses Q1 2025 Financial Highlights vs. Q1 2024 | Metric | Q1 2025 | Change | | :--- | :--- | :--- | | Net Revenue | $2.4 billion | +7% (+8% constant dollar) | | Comparable Sales | +1% | - | | Gross Margin | 58.3% | +60 bps | | Operating Margin | 18.5% | -110 bps | | Diluted EPS | $2.60 | from $2.54 | - The Americas region experienced lower store traffic and a **2% decrease** in comparable sales (**1%** on a constant dollar basis), which management attributes to economic uncertainty, inflationary pressures, and changes in discretionary spending[93](index=93&type=chunk) - Growth was strong internationally, with China Mainland net revenue increasing **21%** (**22%** constant dollar) and Rest of World net revenue increasing **16%** (**17%** constant dollar)[98](index=98&type=chunk) - Selling, general and administrative (SG&A) expenses increased by **11.9%** to **$942.9 million**, rising to **39.8%** of net revenue from **38.1%** in the prior year, primarily due to higher head office costs and costs related to operating channels[100](index=100&type=chunk)[102](index=102&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations, which reduced Q1 2025 revenue by $21.3 million, and inflationary pressures, while interest rate risk remains low due to an undrawn credit facility - Foreign currency fluctuations reduced reported revenue by **$21.3 million** in Q1 2025 compared to Q1 2024[144](index=144&type=chunk) - The company hedges a portion of its net investment in its Canadian subsidiary and also uses forward contracts to economically hedge revaluation gains and losses on monetary assets and liabilities in foreign currencies[145](index=145&type=chunk)[146](index=146&type=chunk) - Interest rate risk is currently low, as the company's **$400.0 million** revolving credit facility, which bears a variable interest rate, had no borrowings outstanding as of May 4, 2025[149](index=149&type=chunk) - Inflationary pressures on costs for products, transportation, labor, and raw materials may adversely affect operating results if they cannot be offset[154](index=154&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of May 4, 2025, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of May 4, 2025[156](index=156&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[157](index=157&type=chunk) [PART II. OTHER INFORMATION](index=41&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal matters, with significant proceedings like a securities class action lawsuit detailed in Note 12, and expects no material adverse financial impact - The company refers to Note 12 for details on significant legal proceedings, including a securities class action and derivative lawsuits[160](index=160&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including brand reputation damage, intense competition, supply chain disruptions, economic downturns, cybersecurity threats, and evolving ESG pressures, alongside international operational and trade risks - **Business Risks:** Success is highly dependent on maintaining brand value, operating in a competitive market, and anticipating consumer trends. Failure to do so could lead to lower sales and excess inventory[162](index=162&type=chunk)[164](index=164&type=chunk)[167](index=167&type=chunk) - **Supply Chain Risks:** The company relies on a limited number of international suppliers, primarily in Asia. Approximately **40%** of products were made in Vietnam and **49%** by the top five vendors in 2024. Disruptions could significantly impact product availability[199](index=199&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - **Economic & Political Risks:** Economic uncertainty, particularly in the Americas, has already led to lower store traffic. Tariffs, trade restrictions, and geopolitical instability pose significant risks to costs and consumer demand[212](index=212&type=chunk)[214](index=214&type=chunk) - **Information Security Risks:** The company faces threats from cyber-attacks and must comply with a complex and evolving landscape of global privacy laws (e.g., GDPR, CCPA, PIPL), with non-compliance carrying risks of fines and reputational damage[187](index=187&type=chunk)[193](index=193&type=chunk) - **ESG Risks:** The company faces increasing pressure and scrutiny regarding climate change and other ESG practices from investors, regulators, and other stakeholders, which could lead to increased costs and reputational risk[244](index=244&type=chunk)[246](index=246&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=65&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2025, the company repurchased 1,363,227 shares of common stock, with approximately $1.14 billion remaining authorized under the repurchase program as of May 4, 2025 Q1 2025 Stock Repurchase Activity | Period (2025) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Feb 3 - Mar 2 | 280,015 | $383.59 | | Mar 3 - Apr 6 | 858,823 | $308.61 | | Apr 7 - May 4 | 224,389 | $258.30 | | **Total** | **1,363,227** | **N/A** | - As of May 4, 2025, the remaining authorized amount for share repurchases under the current program was approximately **$1.14 billion**[254](index=254&type=chunk) [Item 5. Other Information](index=65&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the first quarter of 2025 - No directors or officers adopted or terminated pre-arranged stock trading plans (Rule 10b5-1 or non-Rule 10b5-1) during the first quarter of 2025[255](index=255&type=chunk) [Item 6. Exhibits](index=66&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements in iXBRL format - Key exhibits filed include CEO and CFO certifications (**Exhibits 31.1, 31.2, 32.1**) and the interactive data file (iXBRL) for the financial statements (**Exhibit 101**)[257](index=257&type=chunk)

Exhibit 99.1 LULULEMON ATHLETICA INC. ANNOUNCES FIRST QUARTER FISCAL 2025 RESULTS Revenue increased 7% to $2.4 billion, or increased 8% on a constant dollar basis Comparable sales increased 1% Diluted EPS of $2.60 Vancouver, British Columbia – June 5, 2025 – lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the first quarter of fiscal 2025, which ended on May 4, 2025. Calvin McDonald, Chief Executive Officer, stated: "In the first quarter, we achieved growth across channels, categ ...