Lululemon shares drop more than 10% as CEO says inflation, economic concerns are weighing on spending

Lululemon beat Wall Road expectations for fiscal fourth-quarter earnings and income, however issued 2025 steering that upset analysts.

On an Thursday earnings name, CEO Calvin McDonald mentioned the athleticwear firm performed a survey earlier this month that discovered that customers are spending much less resulting from economic and inflation concerns, leading to decrease U.S. visitors at Lululemon and business friends. Nonetheless, he mentioned, company responded effectively to innovation on the firm.

“There continues to be appreciable uncertainty pushed by macro and geopolitical circumstances. That being mentioned, we stay targeted on what we are able to management,” McDonald mentioned.

Shares of the attire firm fell more than 10% in prolonged buying and selling.

Lululemon was solely the most recent retailer to say it expects slower gross sales for the remainder of this 12 months as concerns develop a couple of slowing economic system and President Donald Trump’s tariffs.

This is how the corporate did in contrast with what Wall Road was anticipating for the quarter ended Feb. 2, based mostly on a survey of analysts by LSEG:

• Earnings per share: $6.14 vs. $5.85 anticipated
• Income: $3.61 billion vs. $3.57 billion anticipated

Fourth-quarter income rose from $3.21 billion throughout the identical interval in 2023. Full-year 2024 income got here in at $10.59 billion, up from $9.62 billion in 2023.

Lululemon’s fiscal 2024 contained 53 weeks, one week longer than its fiscal 2023. Excluding the 53rd week, fourth-quarter and full-year income each rose 8% 12 months over 12 months for 2024.

Lululemon expects first-quarter income to whole $2.34 billion to $2.36 billion, whereas Wall Road analysts had been anticipating $2.39 billion, in keeping with LSEG. The retailer anticipates it would submit full-year fiscal 2025 income of $11.15 billion to $11.30 billion, in comparison with the analyst consensus estimate of $11.31 billion.

For the primary quarter, the corporate expects to submit earnings per share within the vary of $2.53 to $2.58, lacking Wall Road’s expectation of $2.72, in keeping with LSEG. Full-year earnings per share steering got here in at $14.95 to $15.15 per share, whereas analysts anticipated $15.31.

CFO Meghan Frank mentioned on the Thursday earnings name that gross margin for 2025 is anticipated to fall 0.6 share factors resulting from increased fastened prices, overseas alternate charges and U.S. tariffs on China and Mexico.

Lululemon reported a web earnings for the fourth quarter of $748 million, or $6.14 per share, in contrast with a web earnings of $669 million, or $5.29 per share, in the course of the fourth quarter of 2023.

Comparable gross sales, which Lululemon defines as income from e-commerce and shops open a minimum of 12 months, rose 3% 12 months over 12 months for the quarter. The comparability excludes the 53rd week of the 2024 fiscal 12 months. Analysts anticipated the metric to rise 5.1%.

Comparable gross sales within the Americas had been flat, whereas they grew 20% internationally. Lululemon has been dealing with a gross sales slowdown within the U.S., though McDonald mentioned its U.S. enterprise stabilized within the second half of the 12 months and partially attributed the development to new merchandise. He added that Lululemon will increase its shops to Italy, Denmark, Belgium, Turkey and the Czech Republic this 12 months.