Lululemon Athletica (LULU -19.71%) reported its fiscal 2025 first-quarter results on June 5, 2025, delivering revenue growth of 7.3% to $2.4 billion, GAAP EPS of $2.60, and gross margin expanded to 58.3%. Management maintained full-year revenue guidance of $11.15 billion–$11.3 billion (7%-8% growth on an adjusted basis), but it lowered operating margin and earnings guidance for the full fiscal year over concerns about the effects of tariffs.
The following analysis highlights key performance inflections, risk management actions, and global growth opportunities with concrete data and executive commentary.
Lululemon Showed Strong Global Performance and Market Share Gains, As U.S. Demand Softness
In Mainland China, revenue rose 22% on a constant currency basis, and comparable sales grew 8% in Mainland China, while Rest of World revenue jumped 17%, reflecting accelerated international expansion with 59 new stores year over year as of quarter-end and 154 stores now in China. In contrast, North American comparable sales declined 1% (on a constant currency basis), with U.S. revenue up just 2%, despite expanded product innovation and elevated brand activations that drove U.S. unaided brand awareness from the mid-30% range in Q4 FY2024 to 40%.
"Even with this, we gained market share across both men's and women's in the premium athletic wear market in the United States."
— Calvin McDonald, CEO
Lululemon's ability to capture market share in a cautious U.S. consumer environment underscores the brand's competitive strength, but it must balance reliance on robust international momentum against persistently tepid U.S. traffic and discretionary spending trends.
Decisive Tariff Mitigation Strategy Anchored By Financial Strength
The company recorded a 60-basis-point improvement in gross margin, beating internal expectations, yet updated its FY2025 operating margin forecast to reflect a 160-basis-point annual decline, compared to the prior 100-basis-point estimate, nearly entirely attributable to incremental U.S. tariffs on Chinese and other country sourcing (30% and 10%, respectively) in FY2025, partially offset by supply chain efficiencies and pricing. Lululemon's net cash position stands at $1.3 billion as of quarter-end, and the first quarter saw $430 million in share buybacks, with $1.1 billion in buyback authorization remaining as of quarter-end.
"We are planning to take strategic price increases, looking item by item across our assortment as we typically do, and it will be price increases on a small portion of our assortment, and they will be modest in nature. And then on the sourcing side, we are also pursuing some efficiency actions there, some of which will impact the second half of this year, and then we are also focused on that into 2026 as well."
— Meghan Frank, CFO
The company's deliberate, targeted price actions and dual-sourcing logistics, enabled by margin resilience and liquidity, reduce the risk of significant market share loss or margin compression from external tariff shocks, though protection against deeper or prolonged geopolitical disruptions may be limited by these same strategic constraints.
Product Innovation and Newness Fuel Future Growth Engine
Both male and female categories delivered 7%-8% revenue growth, supported by new launches such as the Daydrift trouser (sold out in most stores) and the limited-store Align No Line, which will scale to all stores in Fall 2025. Management confirmed that newness penetration has fully recovered to historical norms, with a greater proportion invested in new core-intended styles that have already shown strong early guest response and sell-through, as evidenced by the rapid expansion plans for these products.
"I'm pleased with the newness mix and the work the team has done. And what we have seen is the consumer respond very well to the completely new styles that she hasn't seen before, and that's sort of the mix that you will see us continue to do heading into the back half of this year."
— Calvin McDonald, CEO
Effective product innovation, coupled with fast-cycle merchandising and targeted inventory allocation, positions lululemon to capture incremental guest spend and drive multi-year franchise creation, remaining resilient even if broader apparel sector demand recovers slowly.
Looking Ahead
Management reaffirmed full-year fiscal 2025 revenue guidance of $11.15 billion to $11.3 billion (7%-8% constant dollar growth, excluding the 53rd week). It expects international (China) revenue growth of 25%-30%, and plans 40-45 net new company-operated store openings (primarily abroad) for low double-digit percentage square footage expansion. FY2025 gross margin is projected to decrease approximately 110 basis points compared to FY2024, mainly due to tariffs, with operating margin expected to decline 160 basis points for fiscal year 2025, and diluted EPS is guided to $14.58–$14.78 for FY2025 (compared to $14.64 in FY2024).
Mitigation of tariff headwinds is expected to be most effective in the second half of FY2025, with moderate, selective price increases rolling out by Q3 and continued focus on inventory discipline. No additional, unambiguous quantitative guidance was provided for U.S. comp inflection or further EPS impact from potential macro deterioration in FY2025.