Lululemon Athletica (LULU, Financials) shares dropped 15% Friday after the company reported fiscal fourth-quarter earnings that beat analyst expectations but issued weaker-than-expected guidance for 2025.
For the quarter ending February 2, the sports clothing company made $748 million, or $6.14 per share. This was more than the $669 million, or $5.29 per share, it made in the same quarter last year. If you don't count the extra week in fiscal 2024, sales went up from $3.21 billion to $3.61 billion. Both numbers went past estimates.
The Vancouver-based store, on the other hand, said it expected fiscal first-quarter earnings of $2.53 to $2.58 per share on sales of $2.34 billion to $2.36 billion, which was less than what analysts were expecting ($2.72 per share on $2.39 billion in sales). The company thought it would make between $11.15 billion and $11.30 billion in sales and $14.95 to $15.15 per share in profits for the whole year. Analysts thought the company would make $11.31 billion and $15.31 per share.
In a results call, Chief Executive Officer Calvin McDonald said that economic and price factors are making people less likely to spend money, especially in the US. A recent poll done by the company found that Lululemon stores and its retail competitors get less foot traffic. McDonald said that the company is focused on things it can control, even though there is still a lot of instability in the macro economy and geopolitics. He also said that customers are interested in Lululemon's new products.
Comparable sales went up 3% year over year, which was less than the 5.1% rise that was expected. In the Americas, earnings stayed the same, but in other countries, they went up 20%. From $9.62 billion in 2023 to $10.59 billion this year, sales went up. If you take out the extra week in fiscal 2024, both the fourth quarter and the whole year's sales went up by 8%.
Chief Financial Officer Meghan Frank said that the company expects its profit margin to drop by 0.6 percentage points this year. This is because of higher fixed costs, bad foreign exchange rates, and U.S. taxes on goods from China and Mexico. The company said that taxes are still not expected to have a big effect on its total profits.
Opening new stores in Italy, Denmark, Belgium, Turkey, and the Czech Republic during fiscal year 2025 is part of Lululemon's plan to grow its business around the world.
