Lululemon posts first revenue decline in five years
The athletic-apparel retailer’s earnings per share fell 35% to $1.69 in the latest quarter.
Lululemon Athletica (LULU) reported its first year-over-year revenue decline in five years, as slowing demand in North America offset still-strong but moderating international growth. Total net revenue rose 4% to $2.5 billion in the quarter ended May 4, the company said, a sharp deceleration from prior quarters and below the 2% constant-dollar growth rate.
The results marked a notable inflection for the Vancouver-based retailer, which had previously delivered consistent double-digit growth. Gross profit fell 3% to $1.3 billion, while gross margin compressed 410 basis points to 54.2%, pressured by higher product costs and promotional activity. Income from operations plunged 37% to $276.9 million, and operating margin narrowed 730 basis points to 11.2%.
Americas revenue declined 3% on a reported basis and 4% in constant currency, continuing a negative trend that has weighed on the company’s largest market. Comparable sales in the region fell 5%, or 6% on a constant-dollar basis, while international comparable sales rose 13%, though growth slowed sequentially. Total comparable sales increased just 1% and declined 2% in constant currency, a sharp pullback from prior quarters.
Inventory levels rose 2% to $1.7 billion, though unit counts fell 4%, suggesting higher costs or a shift in product mix. The company opened five net new stores in the quarter, ending with 816 locations, a slower pace of expansion than in prior periods.
Lululemon slashed its full-year outlook, now expecting revenue to decline 1% to 0% from prior growth expectations. Second-quarter revenue is projected to fall 3% to 2% year-over-year, a significant downward revision. Diluted earnings per share for the full year are now guided to $10.95 to $11.15, down from earlier projections.
The company repurchased 2.2 million shares for $358.3 million during the quarter, a new disclosure that underscored its focus on capital returns amid softer operating performance.
Source: company public filings.