The old adage that you are only as good as your last quarter appears to be dead in today’s economy and Wall Street analysis, instead replaced with, “You are only only as good as your next year forecast.”

That was certainly the case with Nike’s fiscal Q3 report the week before last and it certainly became abundantly clear that it was the new critical measurement in Lululemon’s report last week. While Nike shares fell in the mid- to high-single digits after the company’s guidance fell short of Wall Street’s expectations for its turnaround timelines, Lululemon shares fell 14.2 percent on Friday, March 28 after the company beat fiscal fourth quarter estimates and reported its first $10 billion year, and declined another 3.4 percent on the following Monday. Why?

Analysts are keeping a keen eye on any hint of a consumer slowdown – the fuel for the U.S. economy. They were laser focused on Lululemon’s weaker-than-expected outlook for 2025, and another mention by a retail CEO of a “cautious consumer” and the effect of FX headwinds on EPS estimates.

Perhaps the most dramatic reaction to the Lululemon guidance came from Barclays analyst Adrienne Yih, who lowered the firm’s price target (PT) on LULU shares to $309 from $411 while keeping an “Equal Weight” rating on the shares. The firm noted that Lululemon’s Q4 results beat expectations on sales, gross margin, SGA, and EPS due to strong performance in China and Men’s, but found the guidance for 2025 problematic.

“But at the midpoint, guidance for Q1 2025 and FY25 came in about 7 percent and 2 percent below consensus, respectively, due to traffic pressure and growing macro uncertainty. Barclays remains on the sidelines as it awaits better visibility on a return to sustainable positive comparable sales in the Americas market,” the firm noted.

Telsey Advisory Group (TAG) analyst Dana Telsey lowered that firm’s PT on LULU shares to $385 from $445 but also kept its “Outperform” rating on the shares. TAG noted that the company’s Q4 results “nicely topped” consensus, with sales and growth margins coming in stronger than the company’s updated outlook given in January.

“The newness was back to historical levels in Q1 of 2025, but the company saw slow traffic in February in the U.S. given macro concerns and waning consumer confidence,” the firm added.

At William Blair, analyst Sharon Zackfia published a note to investors reiterating the firm’s “Outperform” rating, citing, in part, LULU returned to historical levels of newness in the first quarter, China was the fastest growing region. Still, the firm noted that domestic U.S. traffic trends have weakened in line with broader trends, translating to 1Q guidance below Zackfia’s and the Street’s estimates.

The firm believes LULU’s valuation represents a ~50 percent discount to more mature and slower-growing Nike. Zackfia pointed to the strength of the Lululemon brand, international momentum, and significant opportunity to grow domestic brand awareness (36 percent vs. peers in the 80 percent range) as reasons for her Outperform rating.

As risks to her thesis is LULU’s ability to maintain and evolve a strong brand image and product portfolio in an industry with intense competition, current and future brand extensions into unproven areas, and difficult double-digit same-store sales comparisons.

Bank of America kept its rating at “Buy” and its PT at $400 after the call. “The strong customer response to newness gives us confidence that LULU can improve NA sales growth when traffic stabilizes; we reiterate our Buy rating,” the firm wrote in a Friday note.

“Lackluster US Trends (again) in 2025 but Guidance Seems Achievable” was how Citibank saw the call and guide, reiterating its PT at $330. “While we view F25 EPS guidance as achievable (with some upside likely), shares are trading (pre-market) at an F25E P/E multiple of 20x, which we believe is fair until they can show the US biz can comp again,” Citi wrote in its investor note.

Stifel also reiterated its “Buy” rating on LULU shares but lowered its PT to $242 from $438 perviously, due to new modeling around lowered EPS and revenue in its modeling. “The outlook embeds a cautious consumer in the U.S. impacting traffic industry wide. New product introductions including the Glow Up, Daydrift, and BeCalm are reportedly resonating with guests following product missteps in 2024,” wrote Stifel Managing Director Jim Duffy in his Friday note to investors. He said guidance contemplates a cautious consumer environment in the U.S. including a “material impact” to traffic across the industry.

Other analysts mentioned Alo and Vuori as threats to the Lululemon business, particularly in the U.S. Other observations cite a potential future challenge from the new NikeSKIMS project and brand launch as potentially problematic, given Nike’s focus on building its women’s business and the ability to infuse capital, marketing strength, and retail relationships into the effort.

In other analysts’ news:

  • Needham lowered Lululemon PT to $366 from $430;
  • BMO Capital lowered Lululemon PT  to $302 from $313; and
  • Truist lowered Lululemon PT to $380 from $460.

Lululemon’s Current Take
On a conference call with analysts, company CEO Calvin McDonald highlighted robust performance in the fourth quarter, with total revenue excluding the 53rd week increasing 8 percent year-over-year, or +9 percent in constant currency (cc). The operating margin improved to 28.9 percent of sales, and EPS grew by 16 percent year-over-year.

Full year sales reached $10.6 billion, helped in part by the extra 53rd week last year.

See link to the 2024 fourth quarter and full year at bottom.

Still, McDonald called out the “missed opportunity” in the U.S. market last year as the level of newness across LULU’s merchandise mix.

“The teams worked with our vendors, chased into what was possible, and improved the penetration of newness in the second half of 2024,” McDonald shared. “These efforts contributed to a stabilization in the U.S. business as the guests responded well to many of the updates we brought into the assortment. I would also note that importantly, our new guest acquisition and retention metrics remain strong, and our opportunity is to drive increased revenue per guest as we continue to bring newness and innovation into the mix.”

McDonald also pointed to unaided brand awareness in France, Germany, and Japan that is only in single digits as the brand looks to invest and expand. In China Mainland, unaided brand awareness is in mid to high-teens. In the UK and Australia, it’s in the 20s. U.S. unaided brand awareness is in the 30s.

He said the company started 2025 with several compelling new product launches, but he also said the dynamic macro environment has contributed to “a more cautious consumer.”

“In fact, based on a survey we conducted earlier this month in conjunction with Ipsos, consumers are spending less due to increased concerns about inflation and the economy. This is manifesting itself into slower traffic across the industry in the U.S. in quarter one, which we are experiencing in our business as well,” he suggested.

These comments apparently triggered writers at TheStreet, who pushed out an article entitled, “Lululemon CEO sounds alarm on unexpected customer behavior.” Not many others heard “alarm” in McDonald’s commentary.

“However, we see guests who visit us responding to the newness and innovations we brought into our assortment,” McDonald added. “We believe this is a positive indication, as we continue to flow new product, engage with our guests through unique and compelling activations, and launch brand campaigns. We are controlling what we can control, and we expect to see modest growth in U.S. revenue for the full year of 2025.”

Placer.ai, the research and advisory firm that tracks foot traffic at retail, recently released a report entitled “Sportswear in the New Year” that found Lululemon saw foot traffic grow during the fourth quarter. In fact, visits grew every quarter during 2024, with Q4 foot traffic up 2.4 percent year-over-year. Still, that was a rosy assessment considering traffic had grown more tha 8 percent earlier in the year, according to at least one analyst.

Company CFO Meghan Frank said the company was pleased with both the level and composition of inventory entering the spring season, and LULU is seeing good customer (guest) response to newness and innovation brought into the assortment.

“However, we also acknowledge the uncertainty in the retail environment as the consumer is navigating a dynamic macro environment,” she added. “While we expect both top- and bottom-line growth for the year, we continue to be thoughtful in our planning.”

Fiscal 2025 Full Year Guidance
For the fiscal 2025 full year, LULU expects revenue to be in the range of $11.15 billion to $11.3 billion, reflecting growth of 5 percent to 7 percent relative to fiscal 2024. Excluding the 53rd week in 2024, LULU expects revenue to grow 7 percent to 8 percent. She Aldo added that the company expects revenue growth in the U.S. to be “modestly positive” for the year.

“I’d also note that we expect foreign exchange to have a negative 1 percentage point impact on our revenue growth rate for the year,” the CFO noted.

She went on the share that the company expects to open 40 to 45 net new company-operated stores in 2025 and complete approximately 40 optimizations.

“We expect overall square footage growth of approximately 10 percent,” she said. “Our new store openings in 2025 will include approximately 10 to 15 stores in the Americas, with the rest of our openings planned in our international markets, the majority of which will be in China.” McDonald said new stores will also be added in existing markets and enter several new countries this year, including Italy, as a new company operated market and Denmark, Belgium, Turkey, and the Czech Republic under a franchise model.

“In terms of our optimization strategy, a recent and compelling example can be seen in London with the relocation and expansion of our Regent Street store,” McDonald offered. “This store which now spans 14,000 square feet, offers the largest pant wall and men’s assortment in Europe. As a destination for both residents and tourists, our new store offers a pinnacle expression of our brand, and we expect it will continue to help us attract new guests into Lululemon from the UK and across Europe.”

Frank said full year gross margins are expected to decrease approximately 60 basis points versus 2024.

“We expect the decrease will be driven by deleverage on fixed costs, FX headwinds, and the impact of increased tariffs related to China and Mexico. For the full year, we expect markdowns to be relatively in line with 2024,” she detailed.

LULU expects SG&A deleverage of approximately 40 basis points to 50 basis points versus 2024, driven by ongoing investments into the company’s Power of Three x2 roadmap and FX headwinds.

“For the full year, we are planning investments in marketing and brand-building aimed at increasing our awareness in acquiring new guests, investments to support our international growth and market expansion, and continued investment in technology and data analytics capabilities,” Frank added.

“When looking at operating margin for the full year 2025, we expect a decrease of approximately 100 basis points versus 2024,” the CFO shared. “While we remain thoughtful as we plan expenses, we also continue to invest in our strategic roadmap to enable future growth. As I mentioned, we are seeing headwinds from foreign exchange and tariffs, while also absorbing some additional costs relative to last year as we layer back in certain expenses, including store labor hours, travel, and incentive comp.”

Frank noted that between 2021 and 2024, LULU’s operating margin increased 170 basis points, which is greater than the Power of Three x2 target of modest operating margin expansion annually.

She said they expect the effective tax rate for the full year to be approximately 30 percent.

“For the fiscal year 2025, we expect diluted earnings per share in the range of $14.95 to $15.15 versus EPS of $14.64 in 2024. Our EPS guidance excludes the impact of any future share repurchases but does include the impact of our repurchases year-to-date,” she detailed on the bottom line.

She also said that FX pressure relative to last year is a 30 cents to 35 cents drag on EPS in 2025.

LULU expects inventory in dollar terms to increase in the high teens in Q1 as the company anniversaries last year’s declines.

Frank also noted that the company expects capital expenditures to be approximately $740 million to $760 million in 2025, related to investments to support business growth, including a continuation of a multi-year distribution center project, store capital for new locations, relocations and renovations, and technology investments.

First Quarter Guidance
LULU expects revenue in the range of $2.335 billion to $2.355 billion in the first quarter, representing growth of 6 percent to 7 percent year-over-year. The growth rate in Q1 is reportedly being negatively impacted by 1 percentage point related to foreign exchange.

The company plans to open three net new company-operated stores in Q1.

In other metrics, LULU expects the first quarter:

  • Gross margin to be approximately flat with Q1 2024, with a modest improvement in product margin, offset primarily by deleverage on fixed costs. Markdowns are planned to be relatively flat with last year;
  • SG&A rate to deleverage by approximately 120 basis points relative to Q1 2024, driven predominantly by increased foundational investments and related depreciation and also strategic investments, including those to build brand awareness to support future growth;
  • Operating margin to deleverage approximately 120 basis points;
  • Effective tax rate to be approximately 30 percent; and
  • Earnings per share to be in the range of $2.53 to $2.58 versus EPS of $2.54 in 2024 Q1.

“Our EPS guidance for the quarter includes approximately 6 cents of incremental negative impact from foreign exchange,” Frank added.

Image courtesy Lululemon Athletica

See below for additional SGB Media coverage of Lululemon’s 2024 fourth quarter and full year results:

Lululemon Posts Double-Digit Sales Gain in Q4 as International Surges