Lululemon Stock Plunges 23% Despite Beating Q1 Expectations

Lululemon beat Wall Street expectations for fiscal first-quarter earnings Thursday, but cut its full-year earnings guidance, citing a “dynamic macroenvironment.” As the company navigates tariffs and fears about a slowing U.S. economy, CEO Calvin McDonald said in a news release that “we intend to leverage our strong financial position and competitive advantages to play offense, while we continue to invest in the growth opportunities in front of us.”

First-Quarter Earnings and Revenue

He said on a conference call with analysts that he is “not happy” with U.S. growth and said U.S. consumers are being cautious and intentional about their buying decisions. The company reported net income for the fiscal first quarter of $314 million, or $2.60 per share, compared with a net income of $321 million, or $2.54 per share, a year earlier. First-quarter revenue rose to $2.37 billion, up from about $2.21 billion during the same period in 2024.

Comparison to Wall Street Expectations

Here’s how the company did for its first quarter compared with what Wall Street was expecting for the quarter ended May 4:

• Earnings per share: $2.60 vs. $2.58 expected
• Revenue: $2.37 billion vs. $2.36 billion expected

Full-Year Guidance and Tariffs

The company cut its full-year earnings guidance. It expects its full-year earnings per share to be between $14.58 to $14.78. Previously, it expected full-year earnings per share to be in the range of $14.95 to $15.15 for the year. Analysts anticipated earnings per share of $14.89. Chief Financial Officer Meghan Frank added on the call that the brand is planning to take “strategic price increases, looking item by item across our assortment,” to mitigate the effect of tariffs.

Price Increases and Tariff Impacts

“It will be price increases on a small portion of our assortments, and they will be modest in nature,” she said, adding that those hikes will start rolling out toward the second half of the current quarter and into the third quarter. Lululemon’s report comes after a string of retailers reduced or withdrew their guidance and said they would hike prices because of uncertainty surrounding President Donald Trump’s tariff regime.

Market Reaction and Industry Comparison

Shares of the apparel company plunged about 23% in extended trading. Among Lululemon’s rivals in the athleticwear category specifically, Gap, which owns athleisure brand Athleta, reported last week that it expects tariffs to impact its business by $100 million to $150 million. Nike told CNBC last month it would begin raising prices on a wide range of products, though it did not specify whether tariffs were the reason for the hikes.

Outlook and Gross Margin

On Thursday’s earnings call, McDonald acknowledged the uncertainty that tariffs have brought on the business, but said he believes the brand is “better positioned than most” to navigate the current environment. Lululemon expects second-quarter revenue to total between $2.54 billion and $2.56 billion. It also anticipates full-year fiscal 2025 revenue to be $11.15 billion to $11.3 billion — unchanged from its last forecast. Gross margin was 58.3%, ahead of the 57.7% that analysts had expected.

Conclusion

In conclusion, Lululemon’s first-quarter earnings report showed a beat in earnings and revenue, but the company cut its full-year earnings guidance due to the impact of tariffs. The company plans to take strategic price increases to mitigate the effect of tariffs. The market reacted negatively to the news, with shares plunging 23% in extended trading.

FAQs

Q: What were Lululemon’s earnings per share for the first quarter?
A: $2.60 per share.
Q: What was Lululemon’s revenue for the first quarter?
A: $2.37 billion.
Q: Why did Lululemon cut its full-year earnings guidance?
A: Due to the impact of tariffs and a “dynamic macroenvironment”.
Q: What is Lululemon’s plan to mitigate the effect of tariffs?
A: The company plans to take strategic price increases on a small portion of its assortments.
Q: How did the market react to Lululemon’s earnings report?
A: Shares plunged 23% in extended trading.