06:31 AM EDT, 03/28/2025 (MT Newswires) -- Lululemon Athletica ( LULU ) shares tanked early Friday as the athletic apparel and footwear company provided a fiscal first-quarter outlook below market estimates amid cautious consumer spending, while its results surpassed expectations in the prior three-month period.

The dynamic macro environment has contributed to "more cautious" consumers who are curtailing their spending amid increased concerns about inflation and the economy, Lululemon Chief Executive Calvin McDonald said during a late Thursday earnings call, according to a FactSet transcript. "This is manifesting itself into slower traffic across the industry in the US in quarter one, which we are experiencing in our business as well," according to McDonald.

Earnings are anticipated to be in a range of $2.53 to $2.58 per share for the current quarter, while revenue is pegged at $2.34 billion to $2.36 billion, the company said. The current consensus on FactSet is for GAAP EPS of $2.63 and sales of $2.37 billion. The stock dropped 13% in the most recent premarket activity.

"However, we see guests who visit us responding to the newness and innovations we've brought into our assortment," McDonald said on the call. "We are controlling what we can control, and we expect to see modest growth in US revenue for the full year of 2025."

The retailer projects EPS to come in between $14.95 and $15.15 in fiscal 2025, compared with the $14.64 recorded in the previous year. Revenue is estimated between $11.15 billion to $11.30 billion, representing annual growth of 5% to 7%. The Street is looking for GAAP EPS of $15.16 and sales of $11.28 billion.

Gross margin in the year is expected to decrease by about 60 basis points versus fiscal 2024, driven by foreign-exchange headwinds and the impact of increased tariffs on China and Mexico, Chief Financial Officer Meghan Frank told analysts on the call. Markdowns are forecast to be relatively in line with the prior fiscal year, Frank said.

For the three months through Feb. 2, Lululemon's net income rose to $6.14 a share from $5.29 the year before, topping the average analyst estimate of $5.85. Revenue grew to $3.61 billion from $3.21 billion last year, ahead of the Street's $3.58 billion view. Sales in the Americas gained 7%, while international revenue climbed 38%.

Comparable sales inclined 3% year on year, but fell short of analysts' estimate for a 5.4% increase. Same-store sales were flat in the Americas and jumped 20% internationally. The softer-than-expected same-store sales growth in the US reflects a domestic slowdown while international comparable sales also fell short of expectations, Brian Mulberry, client portfolio manager at Zacks Investment Management, said in remarks emailed to MT Newswires.

Gross margin rose by 100 basis points to 60.4% in the fourth quarter, buoyed by lower product costs, reduced markdowns and improved shrink, Frank said on the call. "If margin expansion continues, it could ease pressure on EPS growth beyond the next few quarters, positioning the company for stronger long-term performance," according to Mulberry.

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