lululemon Q4 Earnings & Revenues Beat, Margin Pressures Persist

Core Insights - lululemon athletica inc. (LULU) reported fourth-quarter fiscal 2025 results with revenues and earnings per share (EPS) exceeding the Zacks Consensus Estimate, but the bottom line declined year-over-year due to margin pressures from higher markdowns, tariff-related costs, and elevated SG&A expenses [1][7]. Financial Performance - LULU's fiscal fourth-quarter EPS was $5.01, an 18.4% decline from $6.14 in the prior-year quarter, yet it surpassed the Zacks Consensus Estimate of $4.77 [2]. - Quarterly revenues increased by 1% year-over-year to $3.64 billion, beating the Zacks Consensus Estimate of $3.58 billion, while net revenues in the Americas declined by 4% and increased by 17% internationally [3][7]. - Total comparable sales rose by 3% year-over-year, with a notable 20% increase internationally, while the Americas saw a 1% increase [4]. Segment Analysis - In the Americas, revenues rose 1% in Canada but declined 6% in the United States. Internationally, revenues surged 24% in Mainland China and 10% in the Rest of the World [8]. - Digital revenues improved by 5% year-over-year, contributing $1.9 billion to total revenues, while store channel sales decreased by 5% [9]. Margin and Expense Details - Gross profit declined by 8% year-over-year to $2 billion, with a gross margin contraction of 550 basis points to 54.9%, primarily due to increased markdowns and tariff impacts [10]. - SG&A expenses increased by 4% year-over-year to $1.18 billion, with the SG&A expense rate rising to 32.5% [12]. Future Guidance - For fiscal 2026, LULU anticipates net revenues of $11.35-$11.5 billion, indicating 2-4% year-over-year growth, with a projected decline in Americas revenues of 1-3% [22]. - The company expects a 120-bps year-over-year decline in gross margin for fiscal 2026, driven by fixed-cost deleverage and continued investments [25]. - LULU projects an EPS of $12.10-$12.30 for fiscal 2026, down from $13.26 in fiscal 2025 [27]. Store Expansion Plans - In the fourth quarter of fiscal 2025, LULU opened 15 net new stores and plans to open 40-45 net new stores in fiscal 2026, with a focus on international markets, particularly China [14][15]. Tariff Impact - The company incurred gross tariff expenses of $275 million in fiscal 2025, with projections of $380 million for fiscal 2026, and plans to implement efficiency initiatives to mitigate these costs [20][21].