Despite exceeding Wall Street’s expectations for its fiscal first-quarter earnings,Lululemon cut its full-year earnings guidance,attributing the decision to a “dynamic macroenvironment.”

As the company grapples with tariffs and concerns about a potential slowdown in the U.S. economy,CEO Calvin McDonald stated in a news release that “we intend to leverage our strong financial position and competitive advantages to play offense,while we continue to invest in the growth opportunities in front of us.”

During a conference call with analysts, he expressed dissatisfaction with U.S.growth, noting that “not happy” with U.S. growth and U.S. consumers are exhibiting caution and intentionality in their purchasing decisions.

Chief Financial Officer Meghan Frank mentioned during the same call that the company plans to implement “strategic price increases, looking item by item across our assortment,” to counter the effects of tariffs.

“It will be price increases on a small portion of our assortments, and they will be modest in nature,” she clarified, adding that these adjustments would begin to roll out in the latter half of the current quarter and extend into the third quarter.

Following the declaration, shares of the apparel company experienced a sharp decline of approximately 23% in extended trading.

First Quarter Performance

Here’s a breakdown of Lululemon’s first-quarter performance compared to Wall Street’s expectations for the quarter ending May 4, according to an LSEG survey of analysts:

• Earnings per share: $2.60 vs. $2.58 expected
• Revenue: $2.37 billion vs. $2.36 billion expected

“It will be price increases on a small portion of our assortments, and they will be modest in nature,”

revised Full-Year Guidance

The company has adjusted its full-year earnings guidance, now projecting earnings per share to be between $14.58 and $14.78. This is a reduction from the previous range of $14.95 to $15.15. analysts had anticipated earnings per share of $14.89, as per LSEG data.

Lululemon’s announcement follows a trend of retailers revising or retracting their guidance and indicating price increases due to uncertainties surrounding tariffs. Retailers such as Abercrombie & Fitch and Macy’s have lowered their profit outlooks, while others, including American Eagle Outfitters, have withdrawn their full-year guidance altogether.

Among Lululemon’s competitors in the athleticwear sector,Gap,the parent company of Athleta,reported that it anticipates tariffs to impact its business by $100 million to $150 million. Nike previously informed CNBC of its plans to raise prices on a variety of products, although it did not explicitly attribute the increases to tariffs.

During Thursday’s earnings call, McDonald acknowledged the uncertainty created by tariffs but expressed confidence that the brand is “better positioned than most” to navigate the current environment.

Lululemon reported a net income of $314 million,or $2.60 per share, for the fiscal first quarter, compared to $321 million, or $2.54 per share,in the same period last year.

First-quarter revenue increased to $2.37 billion, up from approximately $2.21 billion in the corresponding period of 2024.

For the second quarter, Lululemon projects revenue between $2.54 billion and $2.56 billion. The company also anticipates full-year fiscal 2025 revenue to be in the range of $11.15 billion to $11.3 billion, wich is unchanged from the previous forecast. Wall Street analysts had projected revenue of $2.56 billion for the second quarter and $11.24 billion for the full year, according to LSEG.

The activewear company expects earnings per share to be between $2.85 and $2.90 for the second quarter, compared to Wall Street’s expectation of $3.29, according to LSEG.

Frank stated during the earnings call that the company’s outlook is based on the current 30% incremental tariff on China and an additional 10% levy on the remaining countries from which the retailer sources.

In 2024, 40% of Lululemon’s products were manufactured in Vietnam, 17% in Cambodia, 11% in Sri Lanka, 11% in Indonesia, 7% in Bangladesh, and the remaining portion in other regions, according to the company’s annual report. Lululemon does not own or operate any manufacturing facilities and relies on suppliers for the production and provision of fabrics, as stated in the report.

Comparable sales increased by 1% year-over-year for the quarter, compared to the 3% anticipated by Wall Street, according to StreetAccount. This includes a 2% decrease in the Americas and a 6% increase internationally.

Gross margin was 58.3%, surpassing the 57.7% expected by analysts, according to StreetAccount.

Though, Frank noted during the earnings call that Lululemon anticipates full-year gross margins to decrease by approximately 110 basis points compared to 2024, a reduction from the previous guidance of a 60-basis point drop. She attributed this difference primarily to increased tariffs.

As of thursday’s close, LULU stock had declined by approximately 13% year-to-date.