Lululemon’s Fourth-Quarter Performance and 2025 Outlook
On July 15, 2024, Lululemon revealed its fiscal fourth-quarter earnings, exceeding Wall Street’s expectations while providing disappointing guidance for the upcoming fiscal year. This announcement comes at a time when concern over the economic landscape is impacting consumer spending across the retail sector.
Fourth-Quarter Highlights
During a conference call for investors, CEO Calvin McDonald shared insights from a recent survey indicating a decline in consumer spending driven by economic pressures and inflation. This trend has contributed to reduced foot traffic at Lululemon locations and among its competitors. Despite these challenges, McDonald noted that customers have positively reacted to the company’s new product innovations.
“There continues to be considerable uncertainty driven by macro and geopolitical circumstances. That being said, we remain focused on what we can control,” said McDonald.
Following the earnings report, Lululemon’s stock saw a sharp decline, falling by 15% in early trading.
Comparative Financial Performance
The company reported impressive earnings results for the quarter ending February 2, with key performance metrics as follows:
- Earnings per Share (EPS): $6.14, versus an expected $5.85
- Revenue: $3.61 billion, exceeding the anticipated $3.57 billion
- Revenue Growth: Up from $3.21 billion in the same quarter of 2023.
For the full fiscal year 2024, Lululemon achieved a revenue total of $10.59 billion, an increase from $9.62 billion in 2023. It is noteworthy that the current fiscal year included an additional week compared to the previous one, contributing to these figures. When adjusted for this extra week, both the fourth-quarter and full-year revenue demonstrated an 8% year-over-year growth.
Looking Ahead: Guidance for 2025
As Lululemon looks to 2025, the company has provided revenue expectations of between $11.15 billion and $11.30 billion, slightly below the consensus estimate of $11.31 billion. The forecast for the first quarter suggests revenues between $2.34 billion and $2.36 billion, falling short of analysts’ expectations of $2.39 billion.
In terms of earnings, Lululemon anticipates EPS in the range of $2.53 to $2.58 for the first quarter, below the expected $2.72. For the entire fiscal year, EPS guidance is set at $14.95 to $15.15 per share, again under the forecasted $15.31.
Cost Pressures and Market Challenges
Chief Financial Officer Meghan Frank highlighted anticipated challenges for the gross margin in fiscal 2025, with a projected decline of 0.6 percentage points attributed to rising fixed costs, unfavorable foreign exchange rates, and tariffs affecting imports from China and Mexico.
Sales Performance Insights
In terms of comparable sales—defined as revenues from online and brick-and-mortar stores that have been open for at least a year—Lululemon reported a 3% increase, which fell short of the expected 5.1% rise. Sales remained flat in the Americas, although international sales surged by 20%. McDonald noted that the U.S. market showed signs of stabilization in the latter half of the fiscal year, partially credited to new product offerings.
Lululemon plans to expand its retail presence further, with plans to open stores in Italy, Denmark, Belgium, Turkey, and the Czech Republic within the coming year.