Lululemon Athletica (LULU.O) announced on Thursday that economic uncertainty is reducing demand for its expensive athletic wear, and U.S. tariffs on imports from China and Mexico have worsened the company’s annual outlook.
Following the announcement, Lululemon's stock dropped by 10% in after-hours trading.
The company’s annual revenue and profit forecast came in lower than Wall Street’s expectations. Lululemon also stated that, like Walmart (WMT.N), it has faced the negative impact of new tariffs imposed by the administration of U.S. President Donald Trump.
"Consumers are spending less due to growing concerns over inflation and the economy. This has led to a slowdown in traffic in the U.S. in the first quarter, which we also felt," said Lululemon CEO Calvin McDonald during a conference call following the earnings report.
The company has been struggling with reduced demand, as its attempts to refresh its product range are not holding up against competitors like Alo Yoga and Vuori, which offer trendier and more attractive styles to consumers.
Lululemon forecasts that in the 2025 fiscal year, the company’s revenue will range from $11.15 to $11.30 billion, while analysts were expecting $11.31 billion. Annual earnings per share are expected to be between $14.95 and $15.15, compared to the average analyst estimate of $15.30 per share.
Comparable sales grew by 3% in the fourth quarter, missing the expected 4% growth, as U.S. figures remained flat. Meanwhile, in China, comparable sales rose by 26% compared to last year.
"The fourth quarter in the U.S. showed no growth due to inventory buildup and muted outlook for 2025. The issue is that the growth rate is slowing, making further increases in sales and earnings per share more challenging," noted analysts at Jefferies.
Despite this, Lululemon beat expectations for quarterly revenue, reaching $3.61 billion compared to the forecasted $3.57 billion, driven by strong holiday season sales.
Quarterly earnings came in at $6.14 per share, which also exceeded the average analyst forecast of $5.85 per share.