Lululemon Shares Drop on Fiscal 2025 Guidance Miss

Lululemon's stock fell 10% post-earnings after 2025 guidance underwhelmed. Despite solid Q4 EPS growth to $6.14, projected revenue and earnings fell short of analyst expectations, raising concerns among investors.

Date: 28-03-2025

AI Rating: 5

Overview of Lululemon's Performance: Lululemon Athletica Inc. reported better-than-expected fourth quarter results, with earnings per share (EPS) of $6.14 surpassing estimates of $5.87. This performance was an increase from $5.29 a year earlier, reflecting a strong operational outcome despite potential macroeconomic headwinds.

Despite this positive Q4 performance, the outlook provided for fiscal 2025 was concerning, causing a significant drop in share price. The projected EPS of $14.95 to $15.15 is below analyst expectations of $15.54. The anticipated revenue for fiscal 2025, estimated at $11.15 to $11.30 billion, also falls short of the average forecast of $11.31 billion.

Revenue and EPS Growth: For Q1 2025, Lululemon expects earnings per share in the range of $2.53 to $2.58, alongside projected revenues of $2.34 billion to $2.36 billion, yielding a growth of 6% to 7%. Given that analysts had estimated revenues to hit $2.36 billion, this projection is closely aligned but still reflects a cautious approach.

In fiscal 2024, Lululemon demonstrated a solid increase in both revenue and EPS. The company's revenue rose by 13% to $3.61 billion compared to the previous year, highlighting strong customer demand and brand loyalty. Nonetheless, the projected lower growth rates for fiscal 2025 are likely to concern investors who may have expected continued robust growth.

Implications on Stock Prices: The market reacted negatively to the guidance, evidenced by a 10% decline in the stock price during after-hours trading. Investors usually price in future growth, and any perceived shortfall may lead to adjustments in stock valuations. The outlook also reflects broader uncertainties affecting consumer spending, which could influence Lululemon's market performance.

Concluding Thoughts: While Lululemon's recent performance has been commendable, the cautious outlook raises questions about future growth potential. Investors will need to weigh the company's strong historical performance against its more conservative growth projections, particularly amidst macro uncertainties.

Stocks: LULU