TLDR
- Lululemon sinks 15% after-hours as U.S. sales slump despite global strength
- Weak U.S. demand overshadows Lululemon’s Q2 gains, stock dives 15% post-close
- Lululemon’s U.S. struggles trigger 15% drop despite solid global expansion
- After strong day, Lululemon plunges after-hours on weak U.S. sales outlook
- Lululemon trims guidance as U.S. sales falter, sparking steep after-hours fall
Lululemon Athletica Inc. ended regular trading on September 4 at $206.09, rising 3.81% during market hours. However, the stock sharply declined by 15.61% to $173.91 in after-hours trading.
Lululemon Athletica Inc. (LULU)
The company reported net revenue of $2.5 billion, up 7% year-over-year, but U.S. sales barely grew. Although international markets delivered 22% growth, comparable sales in the U.S. fell 4%. This marked a shift in performance that raised concerns about Lululemon Athletica’s core North American business.
Diluted earnings per share reached $3.10, slightly above expectations, but down from $3.15 a year earlier. The gross margin slipped 110 basis points to 58.5%, partly due to increased tariffs and product mix challenges. Operating income fell 3% to $523.8 million, while the operating margin declined to 20.7%.
U.S. Market Weakness Drives After-Hours Drop
Lululemon Athletica’s Americas revenue grew only 1%, signaling stagnation in its largest market. Comparable sales in the U.S. decreased, reflecting weaker demand and ongoing product issues. These trends undermined overall performance despite global expansion.
The company attributed the domestic shortfall to poor product execution and weaker consumer engagement. While management committed to fixing merchandise strategy, it acknowledged the current challenges. Tariffs and macroeconomic pressures also contributed to rising costs.
In contrast, international sales increased 22%, with strong demand in markets outside North America. Comparable sales internationally surged 15%, showing the brand’s broader appeal. However, the heavy U.S. exposure remains a key concern.
Guidance Cut for 2025 Fuels Market Reaction
Lululemon Athletica cut its full-year revenue forecast to between $10.85 billion and $11 billion. This reflects growth of 2% to 4%, or 4% to 6% when adjusted for the prior year’s 53rd week. The company also lowered full-year EPS guidance to a range of $12.77 to $12.97.
Higher U.S. tariffs and the removal of the de minimis exemption are expected to reduce gross profit by $240 million. Management said it would seek vendor savings and pricing actions to mitigate the hit. Still, concerns remain over how much margin pressure will persist.
For the third quarter, Lululemon Athletica expects revenue between $2.47 billion and $2.5 billion and EPS between $2.18 and $2.23. These projections imply slower growth and narrower profit margins than earlier in the year. Investors reacted to the cautious tone by driving shares lower in after-hours trading.
Background and Financial Position
Lululemon Athletica opened 14 net new stores during the quarter, ending with 784 total locations. It repurchased 1.1 million shares for $278.5 million, signaling ongoing confidence in the brand. The company held $1.2 billion in cash and had $393.2 million available under its credit facility.
Inventories rose 21% to $1.7 billion, while unit inventory rose 13%, showing moderate supply buildup. The increase was partially planned but could lead to markdowns if U.S. demand remains soft. Management stated that it continues to monitor inventory levels closely.
Lululemon Athletica reiterated its long-term growth potential, especially through international expansion and product innovation. Yet the latest quarterly performance highlighted execution gaps and market-specific risks. Investors will likely focus on U.S. recovery efforts in the coming quarters.
