Lululemon Shares Plunge 15% as Economic Concerns Hit Consumer Spending

Lululemon shares dropped 15% Friday morning despite beating Wall Street’s fourth-quarter earnings and revenue expectations. The decline came after CEO Calvin McDonald noted on Thursday’s earnings call that inflation and economic uncertainty are causing shoppers to reduce spending, impacting traffic in U.S. stores.

“There continues to be considerable uncertainty driven by macro and geopolitical circumstances. That being said, we remain focused on what we can control,” McDonald stated, highlighting positive customer reactions to the company’s new products.

Lululemon is among several retailers recently warning of slower sales, influenced by broader economic challenges and President Donald Trump’s tariffs. However, the Canada-based company expects minimal impact on profits from U.S. tariffs affecting Canada, Mexico, and China.

For the quarter ending February 2, Lululemon reported earnings per share of $6.14 versus the expected $5.85, and revenue of $3.61 billion compared to the forecasted $3.57 billion, according to an LSEG analyst survey. Revenue grew from $3.21 billion in the same quarter last year. For full-year 2024, revenue reached $10.59 billion, an increase from $9.62 billion the previous year.

Excluding the additional 53rd week in fiscal 2024, quarterly and annual revenue each grew by 8%.

Looking ahead, Lululemon projected first-quarter revenue between $2.34 billion and $2.36 billion, slightly below analysts’ expectations of $2.39 billion. For full-year fiscal 2025, the retailer anticipates revenue from $11.15 billion to $11.30 billion, just below Wall Street’s estimate of $11.31 billion.

The company expects first-quarter earnings per share between $2.53 and $2.58, lower than the anticipated $2.72. For the full year, earnings per share are projected between $14.95 and $15.15, short of analysts’ forecast of $15.31.

CFO Meghan Frank mentioned during the earnings call that gross margin in 2025 will likely decline by 0.6 percentage points, mainly due to increased fixed costs, foreign exchange impacts, and tariffs on imports from China and Mexico.

Fourth-quarter net income was $748 million, or $6.14 per share, an increase from $669 million, or $5.29 per share, in the same period last year. Comparable sales rose by 3%, below the expected 5.1%. Sales in the Americas remained flat, though international sales grew 20%.

Despite the slowdown in U.S. sales, McDonald said the American market stabilized later in the year, partly due to new product launches. He also announced plans to expand Lululemon stores into Italy, Denmark, Belgium, Turkey, and the Czech Republic in the coming year.