To The Moon

$Lululemon Athletica(LULU)$ is scheduled to release its fiscal Q1 2025 earnings on Thursday, 05 June 2025, after the market closes.

Revenue: The analyst consensus for Q1 2025 revenue is approximately $2.39 billion, aligning with the higher end of Lululemon's guidance.

EPS: The analyst consensus for Q1 2025 EPS is around $2.58, which is at the very top end of the company's guidance. Some analysts have slightly higher individual estimates, but the consensus is tightly clustered.

Lululemon Athletica (LULU) Last Neutral Earnings Call Saw Share Price Declined By 7.16%

Lululemon had a neutral earnings call on 27 March 2025 which saw its share price declined by 7.16% since.

Lululemon's earnings call highlighted strong revenue growth and successful product innovation. However, challenges in the U.S. market due to traffic declines and significant FX and tariff headwinds are expected to pressure margins in 2025.

Lululemon Athletica (LULU) Guidance

In the Lululemon Athletica Inc.'s fourth quarter and full-year 2024 financial results conference call, the company provided guidance for 2025, highlighting several key metrics. For the full year of 2025, Lululemon expects revenue to range between $11.15 billion and $11.3 billion, representing a growth of 7% to 8% when excluding the 53rd week. The company plans to open 40 to 45 net new stores, primarily in international markets, contributing to a 10% increase in square footage.

Gross margins are anticipated to decrease by approximately 60 basis points due to factors such as foreign exchange headwinds and increased tariffs. SG&A expenses are expected to see a deleverage of 40 to 50 basis points as the company continues to invest in its Power of Three x2 roadmap. Operating margin is projected to decrease by 100 basis points compared to 2024. The effective tax rate is estimated at approximately 30%, and diluted earnings per share are expected to range from $14.95 to $15.15. Lululemon also plans capital expenditures of $740 million to $760 million to support business growth initiatives.

What To Watch For Lululemon Athletica (LULU) Actual Earnings Report

Revenue and EPS performance relative to guidance and analyst expectations: A beat, particularly on the higher end of their own guidance, would be a positive surprise given the cautious outlook provided previously.

For Q4, total net revenue rose 13% or 14% in constant currency to $3.6 billion, and excluding the 53rd week, net revenue increased 8% or 9% in constant currency.

Comparable Store Sales (Comps): This is a critical metric for retail, indicating sales growth from existing stores. Investors will be particularly focused on comps in the Americas, where Lululemon noted "traffic pressure" and a flat performance in Q4 FY2024. Analysts expect a slight decline (around 1%) in Americas comps for Q1, so anything better would be a positive.

The U.S. market experienced traffic declines attributed to a dynamic macro environment, which contributed to a cautious consumer.

International Growth: International markets, especially China Mainland, have been strong growth drivers for Lululemon. Continued robust growth in these regions will be essential to offset any softness in North America. Analysts are watching China comps closely, with some expecting 14% growth, while others are more optimistic at 22%.

China Mainland revenue increased 38% or 39% in constant currency with comparable sales increasing 27%. In the Rest of World, revenue grew by 22% or 26% in constant currency.

Gross Margin and Operating Margin: Given the guidance for declines in both for the full year, the Q1 figures will provide insight into whether the company is managing these pressures effectively. Factors like foreign exchange and tariffs will be key.

Operating margin for full year 2025 is expected to decrease by approximately 100 basis points due to FX headwinds, tariffs, and increased expenses.

Inventory Levels: Effective inventory management is crucial in retail to avoid markdowns and maintain profitability.

Updates on Strategic Initiatives: Lululemon's "Power of Three x2" growth strategy focuses on product innovation, expanding in key markets, and enhancing the guest experience. Any updates on these initiatives, particularly new product success beyond popular lines like "Align," will be relevant.

Successful launches of new product lines like Glow Up, Daydrift, BeCalm, and the expansion of the Align franchise indicate strong product innovation.

Reaffirmation or Adjustment of Full-Year Guidance: This will be the most impactful piece of information. If Lululemon maintains or even slightly raises its full-year guidance, it could signal more confidence in the consumer environment or its strategies. Conversely, a further reduction would be a significant negative.

In Q4, Lululemon repurchased $332 million of stock, bringing total repurchases in 2024 to $1.6 billion, reflecting confidence in long-term prospects. Foreign exchange and tariffs are expected to be a $0.30 to $0.35 drag on EPS in 2025, and gross margins are expected to decrease approximately 60 basis points.

Lululemon Athletica (LULU) Price Target

Based on 30 analysts from Tiger Brokers offering 12 month price targets for Lululemon Athletica in the last 3 months. The average price target is $333.55 with a high forecast of $500.00 and a low forecast of $194.00. The average price target represents a 5.19% change from the last price of $317.09.

Technical Analysis - Exponential Moving Average (EMA)

Though we are seeing positive momentum from RSI on LULU share price, but there have been a recent consolidation due to the fear of impact from the tariffs and this could hit their sales.

This headwind from tariffs is added to the softening traffic seen in the U.S. stores, and we need to note that LULU is trading below 200-day period, normally this means that the bears is in control, and we might see profit taking if there is an upside move if LULU earnings were to beat estimates. So here are two reactions which we might expect.

Positive Reaction: A beat on revenue and EPS (especially if EPS is significantly above the high end of guidance), stronger-than-expected comparable sales (especially in the Americas), and/or a reaffirmation of or positive tweak to full-year guidance could lead to a rally in the stock.

Negative Reaction: Missing revenue or EPS expectations, a continued deceleration in Americas comps, or a further cut to full-year guidance would likely result in a negative stock price reaction. Investor concerns about a broader consumer slowdown and increased competition in the athletic apparel market will be amplified if results are disappointing.

Summary

Lululemon's Q1 FY 2025 earnings will be a crucial report, as investors seek clarity on whether the company's previous cautious outlook was an accurate reflection of market conditions or an overly conservative stance.

I will be watching whether the same headwinds would persist in terms of softening traffic in their U.S. stores and also the FX and tariff headwinds impacting their margin, operating margin is expected to decrease by approximately 100 basis points for full year 2025.

Appreciate if you could share your thoughts in the comment section whether you think LULU would be able to overcome the headwinds challenge in this upcoming reporting quarter.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.