lululemon Surpasses Revenues & Earnings in Q3, Lifts FY25 View

Core Insights - lululemon athletica inc. (LULU) reported third-quarter fiscal 2025 results with revenues and earnings per share (EPS) exceeding Zacks Consensus Estimates, driven by international business growth, although margins declined due to higher markdowns, tariff impacts, and elevated SG&A expenses [1][6]. Financial Performance - EPS for the third quarter was $2.59, a decline of 9.8% from $2.87 in the prior-year quarter, but above the Zacks Consensus Estimate of $2.22 [2]. - Quarterly revenues increased by 7.1% year over year to $2.57 billion, surpassing the Zacks Consensus Estimate of $2.48 billion [2]. - Total comparable sales rose 1% year over year, with a 2% increase on a constant-dollar basis; however, comps in the Americas declined by 5% [3]. Segment Performance - In the Americas, revenues decreased by 1% year over year in Canada and 3% in the United States, while international revenues surged by 46% in Mainland China and 19% in the Rest of the World [7]. - Comps improved by 24% in Mainland China and 9% in the Rest of the World on a constant-dollar basis [7]. Margin and Expense Analysis - Gross profit increased by 2% year over year to $1.43 billion, but gross margin contracted by 290 basis points to 55.6% due to increased markdowns and tariff impacts [9]. - SG&A expenses rose by 8.6% year over year to $988.3 million, with the SG&A expense rate as a percentage of net revenues increasing to 38.5% [11]. Future Outlook - LULU raised its fiscal 2025 revenue and EPS guidance, now expecting net revenues of $10.96-$11.05 billion, indicating a 4% year-over-year growth [19]. - For the fourth quarter, the company anticipates net revenues of $3.5-$3.59 billion, reflecting a 1-3% year-over-year decline [25]. - The company expects a 270-bps year-over-year decline in gross margin, with SG&A expense rate projected to rise by 120 bps [22][23]. Store Expansion Plans - In the third quarter, LULU opened 12 net new stores, bringing the total to 796 stores [13]. - The company plans to open 17 net new stores in the fourth quarter and expects to complete 46 net new stores for fiscal 2025 [14]. Financial Position - As of the end of the third quarter, LULU had cash and cash equivalents of $1 billion and no debt, with stockholders' equity of $4.5 billion [16]. - The company repurchased 1 million shares for $189 million during the fiscal third quarter [17].