Lululemon Shares Plunge 23% After Slashing Full-Year Earnings Forecast

The apparel retailer reported first-quarter earnings that beat Wall Street expectations but said it now expects full-year earnings per share (EPS) between $14.58 and $14.78. That is down from its previous forecast of $14.95 to $15.15. Analysts had been expecting $14.89, according to LSEG.

Revenue for the quarter rose to $2.37 billion, slightly above the expected $2.36 billion and up from $2.21 billion in the same period last year. Net income came in at $314 million, or $2.60 per share, compared to $321 million, or $2.54 per share, a year earlier.

While the company posted a 1% year-over-year increase in comparable sales, it fell short of the 3% rise forecast by analysts. Sales in the Americas dropped by 2%, while international markets saw a 6% increase.

On a conference call with analysts, CEO Calvin McDonald acknowledged soft consumer sentiment in the U.S. “We are not happy with our U.S. growth,” he said. “Consumers are being cautious and selective in their purchases.”

Chief Financial Officer Meghan Frank said Lululemon will implement targeted price increases in the second and third quarters to offset rising costs tied to tariffs. The company expects the adjustments to affect only a small portion of its assortment and to be modest in scale.

“Our outlook assumes the current 30% incremental tariff on China and a 10% levy on other sourcing countries,” Frank said.

Gross margin for the quarter came in at 58.3%, exceeding analyst expectations of 57.7%. However, the company now anticipates full-year gross margin to decline by 110 basis points, down from the previous forecast of a 60-basis point decrease. The revised outlook is driven largely by the tariff environment.

Lululemon reaffirmed its full-year revenue forecast of $11.15 billion to $11.3 billion. For the second quarter, it expects revenue between $2.54 billion and $2.56 billion. Analysts had projected $2.56 billion.

The company also projected second-quarter EPS between $2.85 and $2.90, well below the consensus estimate of $3.29.

Lululemon’s update comes amid broader industry pressure from new U.S. trade policies. Several retailers, including Abercrombie & Fitch and Macy’s, have lowered their forecasts. American Eagle Outfitters recently withdrew its full-year guidance altogether.

In the athleticwear space, Gap’s Athleta brand warned last week of a $100 million to $150 million impact from tariffs. Nike has also announced price increases, though it has not directly linked them to tariffs.

Lululemon, which relies on external suppliers for manufacturing, said 40% of its products in 2024 were made in Vietnam, with additional sourcing from Cambodia, Sri Lanka, Indonesia, and Bangladesh.

As of Thursday’s market close, LULU stock was down about 13% year-to-date.