- Lululemon reported a robust fourth quarter the place income elevated 13%. However the widespread active-wear retailer had a modest outlook for this yr primarily based on uncertainty about tariffs and decrease client spending. Its inventory dropped on the lower-than-expected steerage.
Lululemon’s distinctive quarter had largely to do with “newness,” CEO Calvin McDonald mentioned throughout the activewear model’s earnings name Thursday, however the future doesn’t look as vivid for the corporate.
Introducing new merchandise helped drive larger foot site visitors and curiosity within the model, he mentioned, leading to a 13% fourth-quarter income improve to $3.61 billion that beat Wall Road’s expectations for $3.57 billion, based on a survey of analysts by LSEG. The model launched a number of new traces like Glow Up, BeCalm, and Mile Maker, which all helped “drive friends’ loyalty, repeat buy, and long-term worth,” McDonald mentioned.
However like many different retailers, Lululemon had a lower-than-expected outlook for 2025 as a result of sizzling phrase of the second: uncertainty. Certainly, Wells Fargo analysts wrote in a Friday be aware they believed buyers have been extra thinking about Lululemon’s “subdued” outlook.
McDonald mentioned the corporate had carried out a survey with Ipsos earlier this month concerning client sentiment, and located “customers are spending much less attributable to elevated issues about inflation and the economic system.”
That follows comparable warnings from prime U.S. airways that flagged softer demand for journey in addition to from Lululemon rival Nike and retail big Walmart, which mentioned clients are exhibiting “careworn behaviors.”
It is also in step with different client sentiment surveys launched this week. Client confidence hit a 12-year low, The Convention Board reported Tuesday, and the College of Michigan’s client sentiment survey launched this week plummeted 11%.
At Lululemon, low client confidence is “manifesting itself” into slower foot site visitors within the U.S. this quarter, McDonald mentioned throughout the earnings name, including that “we’re controlling what we will management.”
For the first quarter, the corporate sees income of $2.34 billion-$2.36 billion, under Wall Road views for $2.39 billion.
Meghan Frank, chief monetary officer of Lululemon, mentioned throughout the earnings name “tariff headwinds” may result in slower gross sales in 2025. The truth is, administration sees income of $11.1 billion-$11.3 billion this yr, up modestly from $10.59 billion in 2024 but in addition under analysts’ expectations for $11.31 billion.
Upon that information, Lululemon shares dropped about 10% in prolonged buying and selling. As of mid-morning Friday, shares have been down greater than 15% to $293.66 per share, which can also be a 31% drop from a late-January excessive.
Lululemon didn’t instantly reply to Fortune’s request for remark.
Lululemon’s powerful macro setting for 2025
Different funding banks together with Morgan Stanley, Piper Sandler, and Raymond James downgraded their rankings for Lululemon following the earnings name, based on retail choices tracker Jarvis. Jefferies analyst Randy Konik advised Yahoo Finance “the theme stays that development is fading.”
Though Bernstein analysts referred to as Lululemon the “market chief” for North American sports activities attire, they mentioned the corporate is “notably weak to macro weaknesses,” which may harm foot site visitors this quarter.
Recent financial information out Friday highlighted additional the challenges that corporations like Lululemon face. The Federal Reserve’s most popular inflation gauge ticked larger final month to an annual tempo of two.8%, topping views for two.7%.
On the similar time, client spending rose 0.4% on the month, under forecasts, at the same time as private incomes jumped 0.8%. That warning lifted the private saving charge to 4.6%, the best since June 2024.
In the meantime, Lululemon has grown more and more widespread in China, with web income rising roughly 40% throughout the fourth quarter. This yr, Lululemon plans to open 40 to 45 shops, Frank mentioned, a majority of which might be in China.
However fast-growing challenger manufacturers within the energetic put on house are establishing an “epic showdown” for the business this yr, based on a November report by the Enterprise of Trend and McKinsey & Co.
“2025 is prone to be a time of reckoning for a lot of manufacturers,” the report mentioned. This yr’s outlook “seems to be a continuation of the sluggishness seen in 2024: income development is anticipated to stabilise within the low single digits.”
Lululemon plans to launch extra product traces—certainly one of which may attraction to employees returning to the workplace. The corporate will introduce a brand new cloth referred to as “LuluLinen,” which has the feel and appear of linen, however the really feel of athletic put on.
However “as you might be conscious, the exterior setting stays dynamic, and there continues to be appreciable uncertainty pushed by macro and geopolitical circumstances,” McDonald mentioned throughout the earnings name. “That being mentioned, we stay targeted on what we will management.”
This story was initially featured on Fortune.com
