lululemon Q1 Earnings & Revenues Beat, Stock Dips on Cost Outlook

Core Insights - lululemon athletica inc. (LULU) reported first-quarter fiscal 2025 results with revenues and earnings exceeding expectations and showing year-over-year improvement, driven by broad-based gains across various channels and markets, particularly in the United States [1][5] Financial Performance - The company's EPS for Q1 was $2.60, a 2.4% increase from $2.54 in the prior-year quarter, surpassing the Zacks Consensus Estimate of $2.59 [2] - Quarterly revenues rose 7% year over year to $2.37 billion, exceeding the Zacks Consensus Estimate of $2.36 billion, with net revenues improving 8% on a constant-dollar basis [3][5] - Gross profit increased 8% year over year to $1.4 billion, with gross margin expanding 60 basis points to 58.3% [9][10] Sales and Market Performance - Total comparable sales rose 1% year over year, with a 2% decline in the Americas and a 6% increase internationally [6] - Revenue growth in key markets included a 21% increase in Mainland China and a 16% increase in the Rest of the World [7] Strategic Initiatives - lululemon opened three net new stores in Q1 and plans to open 14 net new stores in Q2, with a total of 40-45 new stores anticipated for fiscal 2025 [13][14] - The company aims for overall square footage growth in the low-double-digits for fiscal 2025, focusing on international markets, particularly China [14] Future Guidance - For fiscal 2025, lululemon anticipates net revenues of $11.15-$11.3 billion, indicating 5-7% year-over-year growth, with expectations of positive growth across all regions [20] - The company expects a gross margin decline of 110 basis points year over year, primarily due to increased tariffs and currency headwinds [21][24] Operational Metrics - SG&A expenses increased 11.9% year over year to $942.9 million, with the SG&A expense rate rising to 39.8% [11] - Operating income rose 1% year over year to $438.6 million, with an operating margin of 18.5% [12] Inventory and Capital Expenditure - lululemon's inventories rose 17% year over year to $1.7 billion, with capital expenditure of $152 million in Q1 [15][16]