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 ...

Financial Performance - Total revenue reached $2.4 billion, a 7% increase[2] - Diluted EPS was $2.60, up by 2%[2] - Total comparable sales increased by 1%[2] Segment Performance - Women's apparel revenue increased by 7%[6] - Men's apparel revenue increased by 8%[6] - Accessories and other revenue increased by 8%[6] - Store revenue increased by 8%[7] - Digital revenue increased by 6%[7] - Americas revenue increased by 3%[8] - International revenue increased by 19%[8] Strategic Initiatives - The company ended Q1 with 770 company-operated stores globally[8]

lululemon athletica inc. LULU will release its first-quarter earnings results after the closing bell on Thursday, June 5. Analysts expect the Vancouver, Canada-based company to report quarterly earnings at $2.59 per share, up from $2.54 per share in the year-ago period. lululemon projects to report quarterly revenue at $2.37 billion, compared to $2.21 billion a year earlier, according to data from Benzinga Pro. On March 27, Lululemon reported fourth-quarter revenue of $3.61 billion, beating the consensus es ...

Core Insights - Strength training is experiencing a resurgence in popularity, becoming a mainstream fitness trend rather than a niche activity [1][4][21] - The shift in fitness culture is evident as more individuals, including women, are engaging in strength training, with a notable increase in participation and acceptance [5][16][21] Industry Trends - Social media platforms are driving the popularity of strength training, with significant growth in related content, such as "female strength training" notes on Xiaohongshu increasing by over 150% in a year [1] - Fitness facilities are adapting to this trend, with more training studios opening and traditional gyms incorporating strength training equipment into their offerings [1][5] Brand Strategies - Major brands like lululemon, adidas, and Nike are expanding their product lines to include strength training apparel and equipment, indicating a shift towards making strength training a part of everyday life [4][10][19] - The introduction of specialized training programs and equipment, such as Nike's "Strength Training Studio" and adidas's redesigned footwear, reflects the growing emphasis on strength training as a key market segment [10][19] Consumer Behavior - The perception of strength training is evolving, with more individuals recognizing its benefits for overall health, emotional stability, and body control, moving beyond traditional views of it being solely for bodybuilders [14][16][21] - Home fitness is also adapting, with consumers increasingly investing in strength training equipment for personal use, such as dumbbells and kettlebells, as part of their home workout routines [7][8] Market Opportunities - The rise of strength training presents new opportunities for the fitness industry, with a focus on light strength training becoming a standard practice, particularly for beginners and women [22][26] - The global fitness trend rankings indicate that traditional strength training remains a core component, highlighting its sustained relevance in the market [22]

Core Viewpoint - Lululemon Athletica is expected to report a 6.6% year-over-year increase in Q1 sales to $2.35 billion and a 1.6% increase in earnings per share to $2.58, driven by strong consumer response, increased store traffic, and robust online sales [1] Group 1: Growth Drivers - The company anticipates continued growth momentum across multiple channels, regions, and product categories in Q1 of FY2025 [1] - International markets, including mainland China, are expected to contribute significantly to the company's performance, with a projected 2.3% year-over-year increase in international revenue [1] - Lululemon's "Power of Three x2" growth strategy focuses on product innovation, customer experience, and market expansion, which is expected to accelerate development [1] Group 2: Challenges - The company faces challenges from inflation and rising interest rates, which are weakening consumer spending on non-essential items, particularly in the women's apparel category in the Americas [2] - Tariff issues are putting pressure on profit margins, with management expressing concerns over the impact of tariffs on imports from Mexico and China [2] - The company expects Q1 gross margin to remain flat year-over-year, with operating margin projected to decline by 120 basis points [2] Group 3: Market Performance and Valuation - Over the past three months, Lululemon's stock price has decreased by 8.9%, underperforming the industry average decline of 6.9% [3] - The current stock price is $317.09, which is 40.3% higher than the 52-week low of $226.01 but 25.1% lower than the 52-week high of $423.32 [3] - The stock's forward P/E ratio is 20.74, above the industry average of 12.72, indicating high investor expectations for future growth, but also suggesting that the current valuation may be elevated [3] Group 4: Long-term Outlook - Despite short-term challenges from inflation, interest rates, tariffs, and weak performance in the Americas market, Lululemon's long-term growth logic remains solid due to ongoing product innovation and global demand expansion [3] - The company is viewed as a robust and strategically forward-looking enterprise, with potential for long-term holders to benefit from its strategic initiatives and international growth [3]

Core Insights - Lululemon Athletica Inc's stock is currently trading at $319.20, buoyed by a price-target increase from TD Cowen to $373 from $370, despite global trade tensions [1] - The company is set to report its first-quarter results on June 5, with shares testing their 320-day moving average [1] - Lululemon is recognized as one of the best S&P 500 stocks to own this month, with an average monthly increase of 9.4% and an 80% higher month-end performance over the past decade [3] Stock Performance - A potential move from the current price could see shares approaching $350, which would be the highest trading level since March and extend a 23% lead over the past nine months [4] - Currently, 14 out of 31 firms covering Lululemon rate it as a "hold" or worse, indicating room for upward momentum [4] Short Interest and Market Sentiment - There is potential for a short squeeze, as short interest has decreased by 8% in the last two reporting periods, but 5.94 million shares sold short still represent 5.4% of the stock's available float [5] - Historically, Lululemon has shown a positive trend in post-earnings reactions, with six of the last eight sessions closing higher, including a notable 16% gain in December [6] - The options market is currently pricing in a larger expected move of 13.8% for trading following the earnings report [6]

Core Viewpoint - Analysts expect Lululemon to report quarterly earnings of $2.58 per share, reflecting a year-over-year increase of 1.6%, with revenues projected at $2.36 billion, up 6.7% from the previous year [1] Earnings Estimates - There has been a downward revision of 1.1% in the consensus EPS estimate over the last 30 days, indicating a reconsideration of initial forecasts by analysts [1][2] Revenue Projections by Channel - Net Revenue from Company-operated stores is projected to reach $1.17 billion, a 9.2% increase year-over-year [4] - E-commerce Net Revenue is expected to be $949.91 million, indicating a 4.9% year-over-year change [4] - Other revenue channels are estimated to generate $248.65 million, reflecting a 6.9% increase from the prior year [4] Revenue Projections by Category and Geography - Other categories are expected to generate $297.53 million, marking an 11% year-over-year increase [5] - Geographic Revenues from the Americas are projected at $1.67 billion, a 3.1% increase year-over-year [5] - Revenue from China Mainland is estimated at $369.72 million, indicating a significant 21.7% year-over-year growth [5] - Revenues from the Rest of World are expected to reach $321.58 million, reflecting a 13.7% increase [6] - United States revenues are projected at $1.37 billion, a 2.5% year-over-year change [6] Store and Sales Metrics - Total stores are expected to increase to 771 from 711 in the previous year [6] - Total Gross Square Footage is projected to reach 3,348.78 Ksq ft, up from 2,988 Ksq ft in the same quarter last year [7] - Total Comparable Sales (in constant dollars) are expected to reach 2.8%, down from 7% reported in the same quarter last year [7] - The consensus estimate for Total Comparable Sales stands at 3.6%, compared to 6% in the same quarter last year [8] Stock Performance - Lululemon shares have increased by 14.2% over the past month, outperforming the Zacks S&P 500 composite, which rose by 6.1% [9]