Latest news with #lululemonathleticainc
Yahoo
6 days ago
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lululemon Q1 Earnings & Revenues Beat, Stock Dips on Cost Outlook
lululemon athletica inc. LULU reported first-quarter fiscal 2025 results, wherein revenues and earnings beat the Zacks Consensus Estimate and improved year over year. The company's top-line growth was fueled by broad-based gains across channels, categories and key markets, particularly the United States, underscoring the continued strength and adaptability of its business model. Positive response to its product innovations, newness and brand activations aided its fiscal first-quarter earnings per share (EPS) of $2.60 increased 2.4% compared with $2.54 reported in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of $2.59. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)Shares of lululemon have dropped 22.4% in the after-hours trading session yesterday despite the better-than-expected first-quarter fiscal 2025 performance. The decline in share price is mainly due to adverse currency rates and the looming effects of the rising tariffs on imports, which are expected to result in elevated costs, hurting the bottom line and margins. This Zacks Rank #3 (Hold) company has seen its shares decline 3.9% in the past three months compared with the Textile - Apparel industry's fall of 2.4%. Image Source: Zacks Investment Research The Vancouver, Canada-based company's quarterly revenues advanced 7% year over year to $2.37 billion and outpaced the Zacks Consensus Estimate of $2.36 billion. On a constant-dollar basis, net revenues improved 8% year over year in the fiscal first quarter. Net revenues grew 3% in the Americas on a reported basis (4% on a constant-dollar basis) and 19% internationally (up 20% on a constant-dollar basis). Management highlighted that the fiscal first quarter revenue growth was at the upper end of its 6-7% year-over-year guidance comparable sales (comps) rose 1% year over year. Comps in the Americas declined 2% on a reported basis and 1% in constant dollars. Internationally, comps increased 6% and rose 7% on a constant-dollar a country basis, revenues increased 4% year over year (9% in constant currency) in Canada and 2% in the United States, 21% in Mainland China (22% in constant currency) and 16% in the Rest of the World (17% in constant currency). Comps improved 8% in Mainland China and 7% in the Rest of the World in the fiscal first quarter. lululemon athletica inc. price-consensus-eps-surprise-chart | lululemon athletica inc. Quote In the store channel, the company's total sales increased 8% on a constant-dollar basis. Digital revenues improved 6% year over year, contributing $961 million, or 40%, to the total gross profit improved 8% year over year to $1.4 billion. Also, the gross margin expanded 60 basis points (bps) to 58.3%, primarily driven by a 130-bps improvement in the product margin, supported by lower product costs, reduced damages and better markdowns. This was partially offset by increased airfreight expenses, 20-bps negative impacts of foreign exchange and 50-bps of net deleverage on fixed also noted that gross margin growth in the quarter was ahead of its guidance, mainly driven by lower product cost leverage on fixed costs and slightly better markdowns. We expected the gross margin to contract 50 bps year over year to 57.2% for the fiscal first expenses of $942.9 million increased 11.9% from the year-ago quarter. SG&A expenses, as a percentage of net revenues, of 39.8% rose 170 bps from 38.1% in the prior-year quarter. The increase in SG&A expense rate was above the anticipated deleverage of 120 bps outlined by the company due to the negative impacts of FX revaluation model predicted SG&A expenses to rise 7.1% year over year for the fiscal first quarter, with a 20-bps increase in the SG&A expense rate to 38.3%.The operating income rose 1% year over year to $438.6 million in the fiscal first quarter. The operating margin of 18.5% expanded 110 bps year over year. Our model predicted a 2.4% year-over-year increase in adjusted operating income. We estimated the operating margin to decline 80 bps year over year to 18.8%. In first-quarter fiscal 2025, LULU opened three net new stores, including five store openings and two closures. Additionally, the company completed four optimizations. As of May 4, 2025, it operated 770 the second quarter of fiscal 2025, the company expects to open 14 net new company-operated stores and complete nine store optimizations. For fiscal 2025, lululemon anticipates 40-45 net new company-operated stores. It also expects to complete 40 co-located optimizations. LULU expects overall square footage growth in the low-double-digits for fiscal 2025. Store openings in fiscal 2025 will include 10-15 in the Americas. The rest of the store openings in fiscal 2025 are expected to occur in the international markets, primarily in China. lululemon exited first-quarter fiscal 2025 with cash and cash equivalents of $1.3 billion. The company had $393.4 million of capacity under its committed revolving credit facility and stockholders' equity of $4.3 billion. Its inventories rose 17% year over year to $1.7 billion, with inventory units improving 16%. The capital expenditure was $152 million in the fiscal first the fiscal first quarter, lululemon repurchased 1.4 million shares for $430.4 million at an average price of $316. As of May 4, 2025, LULU had $1.1 billion remaining under its current share repurchase authorization. LULU is excited about building on its momentum in fiscal 2025 while staying adaptable in the face of macroeconomic uncertainties. With significant opportunities in the pipeline, the company remains confident in its ability to drive sustainable growth and deliver long-term value for all a result, it reiterated its revenue guidance for fiscal 2025. However, the company anticipates higher costs and ongoing uncertainty due to the impacts of increased tariffs on imports from China and Mexico, which are likely to result in higher costs in the quarters fiscal 2025, LULU anticipates net revenues of $11.15-$11.3 billion, indicating 5-7% year-over-year growth. Excluding the 53rd week in 2024, revenues are expected to rise 7-8%. The company's guidance assumes positive revenue growth across all regions, including a low to mid-single-digit increase in North America, a 25-30% rise in Mainland China and a nearly 20% improvement in the Rest of the World. Growth across all markets is expected to be driven by the company's unique product and innovative solutions for guests in the athletic and lifestyle product expects a 110-bps year-over-year decline in the gross margin compared with the previous guidance of a 60-bps decline. The variance from the prior guidance is mainly due to an additional 50 bps of deleverage, led by increased tariffs, partly offset by its enterprise-wide efforts to mitigate these costs and slightly higher markdowns. The higher tariffs are expected to be driven by 30% incremental tariffs on China and an incremental 10% on the remaining countries from where LULU's products are sourced. The company has identified several mitigation strategies to offset these tariff cost headwinds, which are expected to be the most effective in the second half of fiscal SG&A expense rate is expected to rise 50 bps year over year for fiscal 2025, almost in line with the prior guidance, driven by ongoing investments into its Power of Three x2 plan and currency headwinds. Throughout fiscal 2025, the company plans to invest in marketing and brand building to enhance awareness and attract guests, support international growth and market expansion, and strengthen its technology and data analytics expects the fiscal 2025 operating margin to contract 160 bps year over year. The company projects an EPS of $14.95-$14.78, suggesting an increase from the $14.64 reported in fiscal 2024. It anticipates an effective tax rate of 30% for fiscal 2025. lululemon expects a capital expenditure of $740-$760 million for fiscal the second quarter of fiscal 2025, management anticipates net revenues of $2.535-$2.56 billion, indicating 7-8% year-over-year growth. The company expects the gross margin to decline 20 bps year over year, driven by elevated occupancy and depreciation, higher tariff rates, slightly higher markdowns and adverse currency as a percentage of sales, is expected to deleverage 170-190 bps year over year, driven by higher foundational investments and associated depreciation, as well as strategic initiatives to enhance brand awareness and support growth. The operating margin for the fiscal second quarter is expected to decline 380 bps year over year. Notably, it reported operating margin growth of 110 bps in the prior-year quarter. The variance is mainly due to the impacts of external factors like tariffs and currency for the fiscal second quarter is expected to be $2.85-$2.90, whereas it reported EPS of $3.15 in the prior-year quarter. LULU estimates an effective tax rate of 30% for the fiscal second quarter. The company anticipates dollar inventory to increase in the low 20s in the fiscal second quarter and inventory per unit to increase in the low-double-digits, driven by higher tariffs and adverse currency rates. The company expects inventory growth for the rest of the fiscal year to follow a similar pattern. We have highlighted three better-ranked stocks from the same industry, namely Birkenstock Holding PLC BIRK, Urban Outfitters URBN and adidas AG manufactures and sells footwear products. BIRK flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks Zacks Consensus Estimate for Birkenstock's current fiscal-year sales and earnings indicates growth of 21.6% and 36.7%, respectively, from the year-ago period's reported figure. BIRK has a trailing four-quarter earnings surprise of 7.8%, on Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor, and gift products. URBN sports a Zacks Rank #1 at Zacks Consensus Estimate for Urban Outfitters' current fiscal-year sales and earnings indicates growth of 8% and 20.9%, respectively, from the year-ago period's reported figures. URBN has a trailing four-quarter earnings surprise of 29%, on is a leading brand in the sporting goods market with strong positions in footwear, apparel and hardware. The company currently carries a Zacks Rank #2 (Buy).The Zacks Consensus Estimate for adidas' current fiscal-year sales and EPS indicate growth of 12.3% and 86.1%, respectively, from the year-ago period's reported figures. ADDYY has a trailing four-quarter negative earnings surprise of 48%, on average. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report lululemon athletica inc. (LULU) : Free Stock Analysis Report Adidas AG (ADDYY) : Free Stock Analysis Report Birkenstock Holding PLC (BIRK) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
6 days ago
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Was Jim Cramer Right About lululemon athletica inc. (LULU)?
We recently published a list of . In this article, we are going to take a look at where lululemon athletica inc. (NASDAQ:LULU) stands against other stocks that Jim Cramer discusses. In that older episode, a loyal viewer and self-described 'Cramer millionaire' called in with a lighthearted anecdote about his personal fondness for lululemon athletica inc. (NASDAQ:LULU) and asked whether to buy the stock. Cramer appreciated the support but advised waiting until after the company's next earnings report. He said: 'We have to wait for Lulu to report… All the signs are that it's still too soon… I got to tell you, I don't want you in Hanes or anything, I'm not doing a Gildan thing… but there'll come a time to do Lulu, but that time is not just yet.' Advising patience paid off as the stock rebounded +9.23%. lululemon athletica inc. (NASDAQ:LULU) is a premium athletic apparel company known for its yoga-inspired clothing and accessories catering to both performance and lifestyle segments. Jim Cramer remains bullish on the athleticwear brand. Here's what he said on May 30: A store employee in an athletic apparel store restocking merchandise. 'lululemon, there you go, ton of business in China, and as a matter of fact, it's actually been a real bright spot. We did a piece earlier in the week that said that this could be a bottom for the stock, and I think it's just too cheap. I'm sticking by that judgment.' Overall, LULU ranks 8th on our list of stocks that Jim Cramer discusses. While we acknowledge the potential of LULU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey.
Business Wire
7 days ago
- Business
- Business Wire
lululemon athletica inc. Announces First Quarter Fiscal 2025 Results
VANCOUVER, British Columbia--(BUSINESS WIRE)--lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the first quarter of fiscal 2025, which ended on May 4, 2025. Calvin McDonald, Chief Executive Officer, stated: "In the first quarter, we achieved growth across channels, categories, and markets, including the U.S., reflecting the continued strength and agility of our business model. Additionally, guests responded well to the product innovations, newness, and brand activations we delivered around the world. As we navigate the dynamic macroenvironment, 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." For the first quarter of 2025, compared to the first quarter of 2024: Net revenue increased 7% to $2.4 billion, or increased 8% on a constant dollar basis. Americas net revenue increased 3%, or 4% on a constant dollar basis. International net revenue increased 19%, or 20% on a constant dollar basis. Comparable sales increased 1%. Americas comparable sales decreased 2%, or 1% on a constant dollar basis. International comparable sales increased 6%, or 7% on a constant dollar basis. Gross profit increased 8% to $1.4 billion and gross margin increased 60 basis points to 58.3%. Income from operations increased 1% to $438.6 million and operating margin decreased 110 basis points to 18.5%. The effective income tax rate for the first quarter of 2025 was 30.2% compared to 29.5% for the first quarter of 2024. Diluted earnings per share were $2.60 compared to $2.54 in the first quarter of 2024. The Company repurchased 1.4 million of its shares for a cost of $430.4 million. The Company added three net new company-operated stores during the first quarter, ending with 770 stores. Meghan Frank, Chief Financial Officer, stated: "We delivered first quarter revenue growth at the high end of our guidance and are pleased with the start to our second quarter. Looking ahead, we remain focused on our strategy and continue to operate with discipline as we drive the business forward. We are grateful to our teams around the world who are enabling us to deliver these consistent results." Balance Sheet Highlights The Company ended the first quarter of 2025 with $1.3 billion in cash and cash equivalents and the capacity under its committed revolving credit facility was $393.4 million. Inventories at the end of the first quarter of 2025 increased 23% to $1.7 billion compared to $1.3 billion at the end of the first quarter of 2024. On a unit basis, inventories increased 16%. 2025 Outlook For the second quarter of 2025, the Company expects net revenue to be in the range of $2.535 billion to $2.560 billion, representing growth of 7% to 8%. Diluted earnings per share are expected to be in the range of $2.85 to $2.90 for the quarter. This assumes a tax rate of approximately 30%. For 2025, the Company continues to expect net revenue to be in the range of $11.150 billion to $11.300 billion, representing growth of 5% to 7%, or 7% to 8% excluding the 53rd week of 2024. Diluted earnings per share are now expected to be in the range of $14.58 to $14.78 for the year. This assumes a tax rate of approximately 30%. The guidance does not reflect potential future repurchases of the Company's shares. The guidance and outlook forward-looking statements made in this press release are based on management's expectations as of the date of this press release and do not incorporate future unknown impacts, including tariffs and macroeconomic trends. The Company undertakes no duty to update or to continue to provide information with respect to any forward-looking statements or risk factors, whether as a result of new information or future events or circumstances or otherwise. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties, including those stated below. Conference Call Information A conference call to discuss first quarter results is scheduled for today, June 5, 2025, at 4:30 p.m. Eastern time. Those interested in participating in the call are invited to dial 1-833-752-3550 or 1-647-846-8290, if calling internationally, approximately 10 minutes prior to the start of the call. A live webcast of the conference call will be available online at: A replay will be made available online approximately two hours following the live call for a period of 30 days. About lululemon athletica inc. lululemon athletica inc. (NASDAQ:LULU) is a technical athletic apparel, footwear, and accessories company for yoga, running, training, and most other activities, creating transformational products and experiences that build meaningful connections, unlocking greater possibility and wellbeing for all. Setting the bar in innovation of fabrics and functional designs, lululemon works with yogis and athletes in local communities around the world for continuous research and product feedback. For more information, visit Shifted Calendar for Comparable Sales Due to the 53rd week in 2024, comparable sales are calculated on a one week shifted basis such that the 13 weeks ended May 4, 2025 is compared to the 13 weeks ended May 5, 2024 rather than April 28, 2024. Non-GAAP Financial Measures We report certain financial metrics on a constant dollar basis, which is a non-GAAP financial measure. A constant dollar basis assumes the average foreign currency exchange rates for the period remained constant with the average foreign currency exchange rates for the same period of the prior year. The Company provides constant dollar changes in its results to help investors understand the underlying growth rate of net revenue excluding the impact of changes in foreign currency exchange rates. Management uses constant currency metrics internally when reviewing and assessing financial performance. The Company's fiscal year ends on the Sunday closest to January 31st of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2024 was a 53-week year while 2025 will be a 52-week year. The expected net revenue increase excluding the 53rd week excludes the net revenue for the 53rd week of 2024. This enables an evaluation of the expected year-over-year increase in net revenue based on 52 weeks in each year. These non-GAAP financial measures are provided in addition to, and not a substitute for, or with greater prominence than, the corresponding financial measures calculated in accordance with GAAP. For more information on these non-GAAP financial measures, please see the section captioned "Reconciliation of Non-GAAP Financial Measures" included in the accompanying financial tables, which includes more detail on the GAAP financial measure that is most directly comparable to each non-GAAP financial measure, and the related reconciliations between these financial measures. The Company's non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures reported by other companies. Forward-Looking Statements: This press release includes estimates, projections, statements relating to the Company's business plans, objectives, and expected operating results that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "outlook," "believes," "intends," "estimates," "predicts," "potential" or the negative of these terms or other comparable terminology. These forward-looking statements also include the Company's guidance and outlook statements. These statements are based on management's current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include, without limitation: the Company's ability to maintain the value and reputation of its brand; its highly competitive market and increasing competition; its ability to anticipate consumer preferences and successfully develop and introduce new, innovative and differentiated products; the acceptability of its products to guests; increasing costs and decreasing selling prices; its ability to accurately forecast guest demand for its products; its ability to expand in light of its limited operating experience and limited brand recognition in new international markets and new product categories; its ability to manage its growth and the increased complexity of its business effectively; changes in consumer shopping preferences and shifts in distribution channels; its leasing of retail and distribution space; its ability to attract, manage, and retain highly qualified individuals; seasonality; its ability to safeguard against security breaches with respect to its technology systems; its compliance with privacy and data protection laws; any material disruption of its information systems; its ability to have technology-based systems function effectively and grow its e-commerce business globally; disruptions of its supply chain; its reliance on a relatively small number of vendors to supply and manufacture a significant portion of its products; suppliers or manufacturers not complying with its Vendor Code of Ethics or applicable laws; fluctuating costs of raw materials; its ability to deliver its products to the market and to meet guest expectations if it has problems with its distribution system; increasing labor costs and other factors associated with the production of its products in South Asia and South East Asia; an economic recession, depression, or downturn or economic uncertainty in its key markets; global economic and political conditions; its ability to source and sell its merchandise profitably or at all if new trade restrictions are imposed or existing trade restrictions become more burdensome; changes in tax laws or unanticipated tax liabilities; its ability to comply with trade and other regulations; fluctuations in foreign currency exchange rates; global or regional health events such as the COVID-19 pandemic and related government, private sector, and individual consumer responsive actions; imitation by its competitors; its ability to protect its intellectual property rights; conflicting trademarks and patents and the prevention of sale of certain products; climate change and related pressures; heightened scrutiny and legal risks from competing pressures regarding ESG; its exposure to various types of litigation; and other risks and uncertainties set out in filings made from time to time with the United States Securities and Exchange Commission and available at including, without limitation, its most recent reports on Form 10-K and Form 10-Q. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law. lululemon athletica inc. Condensed Consolidated Balance Sheets Unaudited; Expressed in thousands May 4, 2025 February 2, 2025 April 28, 2024 ASSETS Current assets Cash and cash equivalents $ 1,325,272 $ 1,984,336 $ 1,900,672 Inventories 1,652,091 1,442,081 1,345,267 Prepaid and receivable income taxes 230,280 182,253 192,955 Other current assets 374,874 371,632 329,193 Total current assets 3,582,517 3,980,302 3,768,087 Property and equipment, net 1,846,609 1,780,617 1,561,185 Right-of-use lease assets 1,549,401 1,416,256 1,263,749 Goodwill and intangible assets, net 178,001 171,191 23,992 Deferred income taxes and other non-current assets 274,015 254,926 211,482 Total assets $ 7,430,543 $ 7,603,292 $ 6,828,495 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 303,975 $ 271,406 $ 261,605 Accrued liabilities and other 506,996 559,463 374,446 Accrued compensation and related expenses 144,222 204,543 132,911 Current lease liabilities 281,837 275,154 254,443 Current income taxes payable 31,276 183,126 53,087 Unredeemed gift card liability 271,076 308,352 268,296 Other current liabilities 33,003 37,586 38,783 Total current liabilities 1,572,385 1,839,630 1,383,571 Non-current lease liabilities 1,424,945 1,300,637 1,147,631 Non-current income taxes payable — — 15,864 Deferred income tax liability 98,189 98,188 29,150 Other non-current liabilities 45,454 40,790 32,471 Stockholders' equity 4,289,570 4,324,047 4,219,808 Total liabilities and stockholders' equity $ 7,430,543 $ 7,603,292 $ 6,828,495 Expand lululemon athletica inc. Condensed Consolidated Statements of Cash Flows Unaudited; Expressed in thousands First Quarter 2025 2024 Cash flows from operating activities Net income $ 314,572 $ 321,421 Adjustments to reconcile net income to net cash provided by operating activities (433,526 ) (193,897 ) Net cash (used in) provided by operating activities (118,954 ) 127,524 Net cash used in investing activities (106,842 ) (131,537 ) Net cash used in financing activities (467,974 ) (328,628 ) Effect of foreign currency exchange rate changes on cash and cash equivalents 34,706 (10,658 ) Decrease in cash and cash equivalents (659,064 ) (343,299 ) Cash and cash equivalents, beginning of period 1,984,336 2,243,971 Cash and cash equivalents, end of period $ 1,325,272 $ 1,900,672 Expand lululemon athletica inc. Reconciliation of Non-GAAP Financial Measures Unaudited Constant dollar changes The below changes show the change compared to the corresponding period in the prior year. Due to the 53rd week in 2024, the below changes in comparable sales are calculated on a one week shifted basis such that the 13 weeks ended May 4, 2025 is compared to the 13 weeks ended May 5, 2024 rather than April 28, 2024. First Quarter 2025 Net Revenue Change Foreign exchange Change in constant dollars United States 2 % — % 2 % Canada 4 5 9 Mexico (1) n/a n/a n/a Americas 3 1 4 China Mainland 21 1 22 Rest of World 16 1 17 Total international 19 1 20 Total 7 % 1 % 8 % Expand ___________________ (1) On September 10, 2024, the Company acquired the lululemon branded retail locations and operations run by a third party in Mexico. Wholesale sales to the third party by lululemon athletica canada inc. prior to the acquisition are disclosed as net revenue recognized within Canada. (2) Comparable sales includes comparable company-operated store and e-commerce net revenue. Comparable company-operated stores have been open for at least 12 full fiscal months, or open for at least 12 full fiscal months after being significantly expanded. Comparable company-operated stores exclude stores which have been temporarily relocated for renovations or have been temporarily closed. Company-operated stores acquired as a result of the acquisition of the Mexico operations will be considered comparable beginning October 2025, after 12 full fiscal months of sales from the date of acquisition. Expand Expected net revenue increase excluding the 53rd week The Company's fiscal year ends on the Sunday closest to January 31st of the following year, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. Fiscal 2024 was a 53-week year while 2025 will be a 52-week year. Fiscal 2025 Expected net revenue increase 5% to 7% Impact of 53rd week 1% to 2% Expected net revenue increase excluding the 53rd week (non-GAAP) 7% to 8% Expand lululemon athletica inc. Company-operated Store Count and Square Footage (1) Square footage expressed in thousands Number of Stores Open at the Beginning of the Quarter Number of Stores Opened During the Quarter Number of Stores Closed During the Quarter Number of Stores Open at the End of the Quarter 2 nd Quarter 2024 711 11 1 721 3 rd Quarter 2024 721 28 — 749 4 th Quarter 2024 749 21 3 767 1 st Quarter 2025 767 5 2 770 Expand Total Gross Square Feet at the Beginning of the Quarter Gross Square Feet Added During the Quarter (2) Gross Square Feet Lost During the Quarter (2) Total Gross Square Feet at the End of the Quarter 2 nd Quarter 2024 2,988 90 3 3,075 3 rd Quarter 2024 3,075 156 — 3,231 4 th Quarter 2024 3,231 153 12 3,372 1 st Quarter 2025 3,372 50 7 3,415 Expand ___________________ (1) Company-operated store count and square footage summary excludes retail locations operated by third parties under license and supply arrangements. (2) Gross square feet added/lost during the quarter includes net square foot additions for company-operated stores which have been renovated or relocated in the quarter. Expand
Business Wire
22-05-2025
- Business
- Business Wire
lululemon athletica inc. Announces First Quarter Fiscal 2025 Earnings Conference Call
VANCOUVER, British Columbia--(BUSINESS WIRE)--lululemon athletica inc. (NASDAQ: LULU) today announced that its financial results for the first quarter fiscal 2025 will be released Thursday, June 5, 2025. The company will host a conference call at 4:30 p.m. Eastern time to discuss the financial results. If you would like to participate in the call, please dial (833) 752-3550 or (647) 846-8290, if calling internationally, approximately 10 minutes prior to the start of the call. A live webcast of the conference call will be available online at: A replay will be made available online approximately 2 hours following the live call. About lululemon athletica inc. lululemon athletica inc. (NASDAQ:LULU) is a technical athletic apparel, footwear, and accessories company for yoga, running, training, and most other activities, creating transformational products and experiences that build meaningful connections, unlocking greater possibility and wellbeing for all. Setting the bar in innovation of fabrics and functional designs, lululemon works with yogis and athletes in local communities around the world for continuous research and product feedback. For more information, visit
Yahoo
29-03-2025
- Business
- Yahoo
Lululemon Athletica (LULU) Q4 2024 Earnings Call Transcript
Lululemon Athletica (NASDAQ: LULU)Q4 2024 Earnings CallMar 27, 2025, 4:30 p.m. ET Prepared Remarks Questions and Answers Call ParticipantsOperator Thank for standing by. This is the conference operator. Welcome to the lululemon athletica inc. fourth quarter and full year 2024 financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator instructions] I would now like to turn the conference over to Howard Tubin, vice president, investor relations, for lululemon athletica. Please go ahead. Howard Tubin -- Vice President, Investor Relations Thank you, and good afternoon. Welcome to lululemon's fourth quarter earnings call. Joining me to talk about our results are Calvin McDonald, CEO; and Meghan Frank, CFO. Before we get started, I'd to take this opportunity to remind you that our remarks today will include forward-looking statements reflecting management's current forecast of certain aspects of lululemon's future. These statements are based on current information which we have assessed, but by which its nature is dynamic, and subject to rapid and even abrupt changes. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business, including those we have disclosed in our most recent filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and we expressly disclaim any obligation or undertaking to update or revise any of these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $295,009!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $42,000!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $523,463!* Right now, we're issuing 'Double Down' alerts for three incredible companies, and there may not be another chance like this anytime soon.*Stock Advisor returns as of March 24, 2025 Reconciliation of GAP to non-GAAP measures is included in our annual report on Form 10-K and in today's earnings press release. In addition, the comparable sales metrics given on today's call are on a constant dollar basis. Press release and accompanying annual report on Form 10-K are available under the investors section of our website at Before we begin the call, I'd like to remind our investors to visit our investor site where you'll find a summary of our key financial and operating statistics for the fourth quarter, as well as our quarterly infographic. Today's call is scheduled for one hour, so please limit yourself to one question at a time to give others the opportunity to have their questions addressed. And now, I would like to turn the call over to Calvin. Calvin McDonald -- Chief Executive Officer and Director Thank you, Howard. I'd like to welcome everyone to our fourth quarter call. I'm pleased to be here to discuss our results, which contributed to another year of growth at lululemon, and also speak to our outlook for 2025. On today's call, I'll start with our performance in Quarter 4, which exceeded the revised guidance we provided in January. And I'll also share some key highlights on our annual performance. Next, I'll provide insights into our product innovation and the strength of our pipeline. I'll then detail our strategies to raise our brand awareness, which remains a significant opportunity for us globally. Meghan will then review our financials and provide our guidance for the first quarter in full year of 2025. Then, we'll take your questions. So, let's get started. In Quarter 4, total revenue, excluding the 53rd week, increased 8%, or 9% on a constant currency basis. Operating margin increased 40 basis points to 28.9%, and earnings per share increased 16%. In addition, in Quarter 4, we repurchased $332 million of stock, which brings our total repurchases in 2024 to $1.6 billion, which demonstrates our confidence in the long-term prospects for lululemon. Shifting now to our full year 2024 results, total revenue was $10.6 billion and, excluding week 53, increased by 8% or 9% in constant currency. Adjusted operating margin increased 50 basis points to 23.7%, and adjusted earnings per share increased 15%. Since 2021, which is the base year of our current Power of Three x2 five-year plan, we have grown revenue at a 19% CAGR, increased adjusted operating margin by 170 basis points, and grew adjusted EPS at a CAGR of 23%. This puts us ahead of our targets for all these key metrics as we enter the fourth year of our plan. I want to thank our teams across the enterprise for their ongoing dedication and commitment to our company. If it wasn't for this global collective, we would not be able to deliver these results. I'd now like to spend a few minutes discussing our product and sharing some highlights from our pipeline of innovation. In Quarter 4, we were happy with our performance across merchandise categories. Outerwear and second layers performed well for both women and men. And within accessories, bags continued to be well received. Overall, we were pleased with the guests' response to the newness we brought into our core franchises for the holiday season. Looking at Quarter 1, we have increased our level of newness on par with the past. We believe this increase, along with a robust pipeline of innovation, will enable us to meet the expectations of our guests. And I'm excited about what the product teams are bringing to market this spring and throughout the year. We started the year strong with the launch of several new innovations. Glow Up is our newest technical franchise for women. Made from a new version of our proprietary Ultralu fabric, the Glow Up Tight offers a smooth and sculpted fit designed to be used for a variety of training workouts. We also introduced a tank top and intend to expand the line in future seasons. Daydrift is our newest lifestyle trouser for women. Made from our Luxtreme fabric, this casual pant offers technical features that provide superior comfort and versatility. Initial response has been very strong, and we've been selling out across several sizes and colors. The teams are chasing into it now, and we have several additions planned for later this year. Based on this response and performance, we believe Daydrift will become a new core franchise. And finally, there is BeCalm, the latest addition to our yoga assortment and offers incredible softness, a relaxed fit, and extreme comfort whether on or off the mat. These are just some of the recent product launches, which have been well received by our guests and demonstrate how we continue to innovate and bring newness into our core activities while also expanding our casual offerings. We're pleased with the positive feedback from guests, which is in line with our expectations and consistent with past successful product launches. And we're excited about our product pipeline, and I'd like to share a few examples. Within shorts, for men, we recently launched a new run franchise called Mile Maker, and we'll soon update License to Train to further lean into this franchise opportunity. For women, we'll update Fast and Free with new seasonal styles and colors later this year, and we'll bring innovation into our swiftly franchise, including a new run short. We'll introduce a new fabric called LuluLinen, which has the look and feel of linen and also includes some technical performance attributes we are known for. And we're excited about the plans we have in place to celebrate the 10th anniversary of our iconic Align franchise. We recently introduced the Align palazzo pant, and we'll expand further with other new bottoms, including a legging with no front seam. Our guests have been asking for this innovation, and we believe this style, along with all the other newness and innovation we are bringing to market, will help drive new guest acquisition and increased purchase from existing guests as well. As you can see, our teams have been hard at work solving for the unmet needs of our guests, and we feel good about our product pipeline for 2025. Our unique approach to innovation is grounded in creating technical apparel with wide-ranging and adaptable use cases. The strength of our pipeline, along with seasonal updates to our core styles, brings newness into our assortment on a regular basis and helps drive guests loyalty, repeat purchase, and long-term value. I'm pleased with the styles we've launched so far this spring, and I'm looking forward to the innovations lined up for the remainder of the year. Shifting now to brand awareness, our teams have been delivering on our strategy to activate the lululemon brand across several of our markets around the world, particularly in the U.S. We continue to focus on increasing our brand awareness, which remains low in nearly every market in which we operate. For example, our unaided brand awareness in France, Germany, and Japan is in single digits. In China, mainland, it's in mid to high teens. In the U.K. and Australia, it's in the 20s. And in the U.S., unaided brand awareness is in the 30s. Increasing awareness and consideration is a meaningful opportunity. So, I want to share some of the strategies we have in place to help us achieve this goal, including: first, the way we show up in our local communities through brand activations, local events, and with our membership program; second, how we leverage relationships with our ambassadors; and finally, our global brand campaigns. Let's begin with our local community-based activations. These events allow us to engage directly with our guests in unique and exciting ways beyond a simple purchase transaction. Our activations are aimed at building loyalty with existing guests and attracting new guests into the brand. We've hit the ground running in 2025. Our teams have been busy bringing the lululemon brand to life in several of our markets around the world, particularly in the U.S. where our opportunity to grow awareness remains significant. In February, we partnered with the Rock 'N' Roll Half Marathon in Las Vegas. We showed up in a big way along the strip with pre-race yoga, cheer stations on the course, co-branded product, and a takeover of the Sphere. Next, to launch our newest franchise, we opened a Glow Up studio in Soho, New York, for two weeks across February and March. In addition to a launch party, we hosted a variety of sweat classes for guests taught by several of our ambassadors, sought after trainers, and local fitness instructors. In London, we celebrated our new collaboration with British fashion designer, Saul Nash, with a launch party during London Fashion Week. We also celebrated the opening of our newly optimized Regent Street store with a lululemon takeover of the giant video screens and newsstands in Piccadilly Circus. And beginning in mid-March and finishing this week, we ran Membership Madness. This event included member-only access to in-store events, free classes at Studio Partners, and the opportunity to win entry to unique experiences we'll host throughout the year. This shows how we are innovating and testing premium ways to connect with our 28 million members and provide them with access to compelling and exclusive experiences. In addition to our activations, we continue to explore and strengthen our relationships with our global ambassadors as we start the year. I'm very excited about the new ambassadors we've introduced to start 2025, including PGA golfer, Max Homa; professional tennis player, Frances Tiafoe; and Formula One champion, Lewis Hamilton. This elevated roster of ambassadors helps us connect with more guests, both existing and new, in markets across the globe. In Quarter 1, we showed how we can leverage these relationships in many ways, including activations and expressions of fan support at the Phoenix Open golf tournament, Indian Wells tennis tournament, and Formula One races in both Melbourne and Shanghai. These are great examples of how we support our athletes as they compete, grow lululemon's credibility and awareness across our growth activities, and allow our local teams to create fun and unique activations for our guests. In addition, these events, along with the high level of activations in this period, contributed to very strong reach and guest engagement in our own social channels to start Quarter 1. While our grassroots brand-building strategies remain very important to us, we use global campaigns to reinforce our brand positioning and bring new guests into lululemon. We recently launched our new brand platform, Live Like You're Alive, with a campaign featuring 78-year-old fitness influencer, Joan McDonald. We'll use Live Like You Are Alive as a foundation for our messaging, and we'll bring new creative into the narrative throughout the year. Upcoming chapters include the celebration of Align's 10-year anniversary in Quarter 2 and a run-focused campaign later in the year. Let me now spend a few moments on our U.S. business and share my perspective as we head into 2025. As I have shared before, the missed opportunity from last year was the level of newness across our merchandise mix. The teams worked with our vendors, chased into what was possible and improved the penetration of newness in the second half of 2024. These efforts contributed to a stabilization in the U.S. business as the guests responded well to many of the updates we brought into the assortment. I would also note that importantly, our new guest acquisition and retention metrics remain strong and our opportunity is to drive increased revenue per guest as we continue to bring newness and innovation into the mix. As you have seen, we started this year with several compelling new product launches, but we also believe the dynamic macro environment has contributed to a more cautious consumer. In fact, based on a survey we conducted earlier this month in conjunction with Ipsos, consumers are spending less due to increased concerns about inflation and the economy. This is manifesting itself into slower traffic across the industry in the U.S. in Quarter 1, which we are experiencing in our business as well. However, we see guests who visit us responding to the newness and innovations we've brought into our assortment. We believe this is a positive indication as we continue to flow new product, engage with our guests through unique and compelling activations, and launch brand campaigns. We are controlling what we can control, and we expect to see modest growth in U.S. revenue for the full year of 2025. Before handing it over to Meghan, I'd like to highlight our square-footage growth plans for 2025. Stores remain an important part of our growth story. Not only are they highly productive, but they are also hubs in our local communities and allow us to engage directly with our guests, which provides us with another important competitive advantage. In 2025, we plan to grow square footage by approximately 10%, which will be driven by new store openings and our ongoing optimization program. We will continue to open stores in existing markets and enter several new countries this year, including Italy as a new company operated market, and Denmark, Belgium, Turkey, and the Czech Republic under a franchise model. In terms of our optimization strategy, a recent and compelling example can be seen in London with the relocation and expansion of our Regent Street store. This store, which now spans 14,000 square feet, offers the largest pant wall and men's assortment in Europe. As a destination for both residents and tourists, our new store offers a pinnacle expression of our brand, and we expect it will continue to help us attract new guests into lululemon from the U.K. and across Europe. We have much to be excited about in 2025. However, as you are aware, the external environment remains dynamic, and there continues to be considerable uncertainty driven by macro and geopolitical circumstances. That being said, we remain focused on what we can control. We've had a busy start to this year with product launches and event activations, and I feel confident with our plans for the remainder of the year. Meghan, over to you. Meghan Frank -- Chief Financial Officer Thanks, Calvin. We delivered Q4 results that exceeded our January guidance update as we saw strength across the key components of the P&L, including sales, gross margin, and SG&A. These results contributed to another year of solid performance, while acknowledging product opportunities we've discussed in our U.S. business. Key highlights in 2024 include revenue growth of 9%, excluding the 53rd week and in constant dollars; adjusted operating margin expansion of 50 basis points; and adjusted earnings-per-share growth of 15%. I'm proud we were able to deliver these strong results while continuing to invest in our strategic initiatives, including building brand awareness through our activations and brand campaigns, growing square footage 14%, and returning 1.6 billion to shareholders through share repurchases. Looking at 2025, we are pleased with both the level and composition of our inventory as we enter the spring season, and we are seeing good guest response to newness and innovation we brought into our assortment. However, we also acknowledge the uncertainty in the retail environment as the consumer is navigating a dynamic macro environment. While we expect both top- and bottom-line growth for the year, we continue to be thoughtful in our planning. I'll take you through our guidance in a moment, but let me now share the financial details of Q4. For Q4, total net revenue rose 13% or 14% in constant currency to $3.6 billion. Excluding the 53rd week, net revenue increased 8%, or 9% in constant currency, and constant dollar comparable sales increased 4%. Within our regions, excluding the 53rd week, results were as follows. America's revenue increased 2%, or 3% in constant currency, with comparable sales flat. By country, revenue increased 11% in constant currency in Canada and increased 1% in the US. China mainland revenue increased 38%, or 39% in constant currency, with comparable sales increasing 27%. And in the rest of world, revenue grew by 22%, or 26% in constant currency, with comparable sales increasing by 17%. In our store channel, total sales increased 13% on a constant dollar basis, excluding the 53rd week. And we ended the quarter with 767 stores globally. footage increased 14% versus last year, driven by the addition of 56 net new lululemon stores since Q4 of 2023. During the quarter, we opened 18 net new stores and completed 16 optimizations. In our digital channel, revenue increased 8% and 4% excluding the 53rd week. We contributed $1.8 billion of top line or 50% of total revenue. And by category excluding the 53rd week, men's revenue increased 12% versus last year, while women's increased, 6% and accessories and other grew 9%. Gross profit for the fourth quarter was $2.2 billion or 60.4% of net revenue compared to gross margin of 59.4% in Q4 2023. The gross profit rate in Q4 increased 100 basis points ahead of our guidance and was driven primarily by the following: a 160 basis point increase in product margin driven predominantly by lower product costs, lower markdowns and improved shrink, offset somewhat by higher air freight; 30 basis-point negative impact from foreign exchange; and 30 basis points of net deleverage on fixed costs. Relative to our guidance, was for a gross margin increase of approximately 30 basis points, the upside was driven predominantly by leverage associated with higher top line, prudent management of fixed expenses within gross margin, and foreign exchange. Moving to SG&A, our approach continues to be grounded in prudently managing our expenses while also continuing to strategically invest in our long-term growth opportunities. SG&A expenses were approximately 1.1 billion, or 31.5% of net revenue compared to 30.9% of net revenue for the same period last year. SG&A was better than our guidance of 80 to 90 basis points of leverage due to higher top line and foreign exchange. Operating income for the quarter was approximately 1 billion or 28.9% of net revenue compared to operating margin of 28.5% in Q4 2023. Tax expense for the quarter was $309 million, or 29.2% of pre-tax earnings, compared to an effective tax rate of 28.1% a year ago. The increase in tax rate relative to last year is due to a decrease in tax benefits related to stock-based compensation, an increase in nondeductible expenses, and an increase in profits outside of the U.S. Net income for the quarter was $748 million, or $6.14 per diluted share, compared to EPS of $5.29 for the fourth quarter of 2023. Capital expenditures were $235 million for the quarter compared to $207 million for the fourth quarter last year. Q4 spend relates primarily to investments that support business growth, including our multi-year distribution center project, store capital for new locations, relocations and renovations, and technology investments. Turning to our balance sheet highlights, we ended the quarter with approximately $2 billion in cash and cash equivalents. Inventory increased 9%, slightly lower than our guidance for an increase in the low double digits. We repurchased 938,000 shares in Q4 at an average price of $354. For the full year, we repurchased approximately $1.6 billion of stock. Share repurchases remain our preferred method to return cash to shareholders, and we currently have approximately 1.3 billion remaining on our repurchase program. Let me now share our detailed guidance outlook for full year 2025. We expect revenue to be in the range of 11.15 billion to 11.3 billion. This range represents growth of 5% to 7% relative to 2024. Excluding the 53rd week that we had in the fourth quarter of last year, we expect revenue to grow 7% to 8%. And as Calvin said, we expect revenue growth in the U.S. to be modestly positive for the year. I'd also note that we expect foreign exchange to have a negative one percentage point impact on our revenue growth rate for the year. We expect to open 40 to 45 net new company operated stores in 2025 and complete approximately 40 optimizations. We expect overall square footage growth for approximately 10%. Our new store openings in 2025 will include approximately 10 to 15 stores in the Americas for the rest of our openings planned in our international markets, the majority of which will be in China. For the full year, we expect gross margins to decrease approximately 60 basis points versus 2024. We expect the decrease will be driven by deleverage on fixed costs, FX headwinds, and the impact of increased tariffs related to China and Mexico. For the full year, we expect markdowns to be relatively in line with 2024. Turning to SG&A for the full year. we expect the leverage of approximately 40 to 50 basis points versus 2024, driven by ongoing investments into our Power of Three x2 roadmap and FX headwinds. For the full year, we are planning investments in marketing and brand building, aimed at increasing our awareness and acquiring new guests, investments to support our international growth and market expansion, and continued investment in technology and data analytics capabilities. When looking at operating margin for the full year 2025, we expect a decrease of approximately 100 basis points versus 2024. But we remain thoughtful as we plan expenses. We also continue to invest in our strategic roadmap to enable future growth. As I mentioned, we are seeing headwinds from foreign exchange and tariffs while also absorbing some additional costs relative to last year as we layer back in certain expenses, including store labor hours, travel, and incentive comp. I would note that between 2021 and 2024, our operating margin increased 170 basis points, which is greater than our prior 3 x 2 of modest operating margin expansion annually. For the full year 2025, we expect our effective tax rate to be approximately 30%. For the fiscal year 2025, we expect diluted earnings per share in the range of $14.95 to $15.15 versus EPS of $14.64 in 2024. Our EPS guidance excludes the impact of any future share repurchases but does include the impact of our repurchases year to date. I would also note that FX pressure relative to last year is a $0.30 to $0.35 drag on EPS in 2025. When looking at inventory, we expect dollar inventory to increase in the high teens in Q1 as we anniversary last year's declines. We expect capital expenditures to be approximately $740 million to $760 million in 2025. This spend relates to investments to support business growth, including a continuation of our multi-year distribution center project, store capital for new locations, relocations and renovations, and technology investments. Shifting now to Q1, we expect revenue in the range of 2.335 billion to 2.355 billion, representing growth of 6% to 7%. The growth rate in Q1 is being negatively impacted by 1 percentage point related to foreign exchange. We expect to open three net new company operated stores in Q1. We expect gross margin in Q1 to be approximately flat with Q1 2024. We expect a modest improvement in product margin, offset primarily by deleverage on fixed costs. Markdowns are planned to be relatively flat with last year. In Q1, we expect our SG&A rate to deleverage for approximately 120 basis points relative to Q1 2024. This will be driven predominantly by increased foundational investments and related depreciation and also strategic investments, including those to build brand awareness to support future growth. When looking at operating margin for Q1, we expect the leverage of approximately 120 basis points. Turning to EPS, we expect earnings per share in the first quarter to be in the range of $2.53 to $2.58 versus EPS of $2.54 a year ago. Our EPS guidance for the quarter includes approximately $0.06 of incremental negative impact from foreign exchange. We expect our effective tax rate in Q1 to be approximately 30%. And with that, I will turn it back over to Calvin. Calvin McDonald -- Chief Executive Officer and Director Thank you for your time today. I am pleased with how we closed out 2024, delivering results that demonstrate our leadership, agility, and potential for growth. And I am proud of how we have started the year with new product innovations, collaborations, and a steady drum beat of brand and community activations around the world. This energy will propel us forward as we navigate the current economic and political uncertainty, especially in the U.S. We will control what we can control. We will focus on continuing to deliver the high level of newness and product innovations our guests expects from lululemon. I continue to feel confident in our Power of Three x2 strategy and our people who will continue to excite and engage with our guests and drive us forward in 2025 and beyond. We'll now take your questions. Operator?Operator [Operator instructions] Our first question is from Alex Straton with Morgan Stanley. Please go ahead. Alex Straton -- Analyst Perfect. Thanks so much, and congrats on a great quarter. I just wanted to focus, Calvin, on the modest US revenue growth you're expecting for the year. Can you just elaborate a little bit around how you define modest? And should that be consistent throughout the year? Any difference in cadence by quarter? And then, just how you really arrive at that as the right level from here? Thanks a lot. Calvin McDonald -- Chief Executive Officer and Director Thanks Alex. I'll take the first, and then I'll pass it over to Meghan to go specifically into breaking down the growth number four you. But as I sort of shared, in Q4, consistent with what we saw throughout the year, our guests responded well to the newness that we offered through our assortment. And our business continued to sequentially get stronger on the back of that newness. And as we transitioned into Q1, our newness is back to being on par where it's been in the past, as we indicated we would be. And the guest has responded very well to a number of new product launches. I'm excited about continuing to build into future franchises, from Glow Up, Daydrift, BeCalm, Shake It Out, as well as what lies ahead in our pipeline, which is very strong. And I shared just a few of those with you with the 10th year anniversary for Align coming up building on the palazzo pant that she's responded incredibly well to, as well as offering a no front seam legging, which we know our guests have been asking and to offer that within the Align franchise as an opportunity to celebrate the 10th anniversary. We're excited about that as a means for our high-value guests, as well as new guests to acquire and bring in. That being said, we are operating within a dynamic macro environment that's really contributed to a cautious consumer where we've seen material impact to traffic across the industry. While we've experienced some of these traffic trends, the guest who is visiting has responded very well to our newness and innovation. When we look at UPT average order size, both of these are positive. So, the guests coming in are responding to the newness, they're buying more, and it's having an impact. So, those are very good indicators. And as we continue to flow the positive newness that we see throughout the year, as well as the activations, I want to touch on North America. in particular in the U.S., we've started the year with a fantastic rhythm and cadence of very unique community-based activations. So overall, there's a very good energy across the teams and in the business, and the guests are responding very well to product. And we're controlling and focused on what we can control. And I think we're well-positioned as these macro challenges soften moving forward. But I'll allow Meghan to just sort of put a little bit of color to the numbers as well. Meghan Frank -- Chief Financial Officer Great. Hi, Alex. So, in terms of the U.S., we are offering color on North America, growing in the low single digit to mid single digit range for the full year. The U.S. on the lower end of that and Canada higher. We're not breaking down the quarters, but what I would share is in terms of Q1. It's not trending materially differently than Q4. As Calvin mentioned, we did come into the quarter and saw a decline in traffic -- macro traffic that's impacting us as well. And we're also seeing some really positive performance in terms of newness, which we believe positions us well as that traffic environment improves. I would also note that the decline was more pronounced last year in the U.S. in Q2, so we're up against our largest growth rate in '24 in Q1. Alex Straton -- Analyst Thanks so much. Good luck. Operator The next question is from Brooke Roach with Goldman Sachs. Please go ahead. Brooke Roach -- Analyst Good afternoon, and thank you for taking my question. Calvin, I was hoping you could elaborate on your marketing strategy from here. Are you seeing the response that you're hoping to get as you build into some of these additional customer acquisition vehicles, such as Membership Madness week? And then, can you speak to what that's driving in terms of consumer acquisition and retention, specifically in the U.S.? Thank you. Calvin McDonald -- Chief Executive Officer and Director Thanks, Brooke. Overall, how we've started this year in the energy and really focusing in on and activating larger activations, community-based events, I'm very encouraged with the results that we're seeing. A lot of those are geared to both acquire new guests, as well as drive loyalty and help in our retention and love for the brand with our high-value guests. Across all of the ones that we've started, and I shared a few of those, the fun activations, celebrating our ambassadors where they compete around the world in Melbourne; the Waste Management Gulf, Indian Wells as a means to activate, and then some of the other activations we've done ourselves into the integrated marketing on the back of Glow Up studio in New York. We had thousands of guests register for Membership Madness. We have over 15,000 guests that have signed up for community-based sweat activations with our partners around North America, heavily in the U.S. We have waiting lists of over a thousand for some of these activations in our communities. These are incredibly strong, rich engagement numbers. And we see through those equally a number of new guests. And that, to me, is one of the very unique aspects of our brand. When I talk about our moat and what makes us unique, the ability to activate a campaign, integrate it across our community, our ambassadors, and bring to life is something we definitely see great value in plan to do even more of this year than last year. And I think you'll just get a flavor for what that looks like. If you think of the first eight weeks of this year to start and the pace of those activations. And the active, as I said, engagement has been very strong. And then, obviously, socially as well, both earned media, as well as the halo we get from those. And that bleeds to getting into that brand awareness. So, you're going to see more of that. We think it's a unique approach, and we do it very strongly across our communities and allows for our stores, our ambassadors to be involved. It's unique, and it's having an impact on both retention and acquisition. So, I'm very pleased with how we've started this year. I think the energy and the cadence is very strong, stronger than we've done in, I think, a number of years, and really feels that we're on the offense in this market. And guests are responding well, and in the newness, they're responding well, too. And as Meghan said, we're focused on what we control and set up well for the rest of the year as the macro challenges soften and if they do. Brooke Roach -- Analyst Great. And then, for Meghan, can you elaborate on the plans that you have embedded in your guidance for tariffs this year? If tariffs were to widen to a broader set of geographies, what are your mitigation strategies right now? And what is the quantification of the current tariffs impact under what you're seeing today? Meghan Frank -- Chief Financial Officer Yeah, absolutely. So, in terms of tariffs, we've got approximately 20 basis points of a headwind embedded in our guidance, which is reflective of current actions on China and Mexico imports. Closely monitoring the environment. We'll continue to look across our cost structure, as well as to pricing, you know, should the environment change. So, definitely keeping a close eye on that. Brooke Roach -- Analyst Thanks so much. Operator The next question is from Dana Telsey with the Telsey Group. Please go ahead. Dana Telsey -- Analyst Hi. Calvin, as you think about the effectiveness of the marketing and what you're seeing globally, I saw the new store in Tokyo, obviously, London also, how are you planning for international go forward and how do you think of the activations there? And then, Meghan, on the margins, the cadence of margins as we go through 2025, are there any puts and takes of what we should be mindful of? And just lastly, for the first quarter sales growth guidance, are you currently within those rates now? Thank you. Calvin McDonald -- Chief Executive Officer and Director Thanks, Dana. I'll take the first part. The activations that I've referred to in the U.S. is absolutely our go-to-market strategy around the globe. And we customize it based on the maturity of the market. Obviously, the U.S., we have an opportunity to amplify deeper with bigger activations in communities in newer markets. We leverage and tap into the store base more and then build the momentum and the size and activate. But the general formula of leveraging local market community, stores, educators, ambassadors -- and there are a number, as you know, around the globe, from sweat games in mainland China, what we did with World Mental Health Day in many markets that were shared, how we're activating around these global competitive events that our ambassadors compete in -- we just did a few Formula One races in both Shanghai and Australia with Lewis Hamilton being one of our latest ambassadors, planned to do that across a lot of our activities. So, that is absolutely one of our unique go-to-market strategies that I think we do better than most, and stores play a big part of that and how we activate those. And we're early in our optimization strategies and plans. If you look back over the last year, even just the last few quarters, we've optimized a store in Melbourne, 11,000 square feet, and it's performing incredibly well. You mentioned the store in Tokyo. We have exciting plans planned for Tokyo seeing Japan as a big growth market for us. We have an exciting plan and opportunity in South Korea. And Regent Street that just opened, that's performing very well with an incredible activation, both on the back of Saul Nash and Fashion Week, as well as the activations the store teams did. So, that is a big part of how we go and activate. You're going to see more of that, as well as these optimizations that continue to perform well. And both acquire local gas, as well as welcome a global tourist gas into the brand that we acquire, as well as they travel, wanting to come in and see the brand and the products. So, excited about the momentum in both internationally, as well as in North America. Meghan Frank -- Chief Financial Officer Great. And I'll take the margin piece. So, in terms of op margin, we are guiding to 100 basis-point decline for the year. At the highest level, I just call out FX and tariff headwinds are a little bit over 50% of that decline in that margin. Then, we've got some investments in the business to add back some of the expense areas we pulled out in '24. So, I would view those three buckets as incremental headwinds unique to this year. And then, we also are continuing to invest into our Power of Three x2 roadmap, you know, with our confidence on the long term. And in terms of quarters, you know, we've got a little bit more pressure as we call down in terms of Q1. It's also related to Q1 being our highest revenue growth rate in '24. So, we've got 120 basis points decline in op margin there. Pretty similar story in terms of SG&A. So, 120 basis points deleverage in Q1 and then 40 to 50 for the year. So, I think that's the color I'd offer there. And then, you also had a question, Dana, on quarter-to-date trend. We're not breaking out specifics on quarter-to-date trend, but I would share we're about 50% through the quarter and looking at current trend of business and mindful of the environment. We did guide to 6% to 7% growth for the quarter with 1 point also of an FX headwind embedded in that. Dana Telsey -- Analyst Thank you. Operator [Operator instructions] The next question is from Lorraine Hutchinson with Bank of America. Please go ahead. Lorraine Hutchinson -- Analyst Thank you. Good afternoon. Have you included any improvement from the choppy first quarter traffic performance in North America and the full year guidance? And are there ways to be more aggressive on some of these marketing activations to drive stronger traffic as we move through the year? Meghan Frank -- Chief Financial Officer Hi, Lorraine. I would say our balance-of-year outlook reflects similar trends to Q1 at this point in time. And I'll let Calvin chime in on marketing. Calvin McDonald -- Chief Executive Officer and Director Yeah, and I think -- we're always testing and learning and looking for ways to continue to invest within the parameters of our guidance to add to marketing. And I think I'm very pleased with the current response from our guests, excited about the campaigns coming. As I mentioned, the Align 10th year anniversary will be a large activation around the globe, supported with a lot of product, new product, and ways that I think will engage both with new guests, as well as our high-value guests and reasons to update their Align wardrobe. So, we always look for ways to keep leaning in and investing. as I mentioned, the cadence and rhythm to start this year has been definitely on the offense. And I'm pleased with the results and those results around the globe. And we're going to continue to be on offense and support the product and the pipeline of newness that's coming and with our guests. Lorraine Hutchinson -- Analyst Thank you. Operator The next question is from Matthew Boss with JPMorgan. Please go ahead. Matthew Boss -- Analyst Great, thanks. So, Calvin, could you elaborate on sales metrics in the U.S. as you've introduced recent newness? Just your confidence in this year's product pipeline with first quarter-to-date sales trends unchanged relative to the fourth quarter despite the softening macro that I know you cited. And then, Meghan, just your comfort with content and composition of inventory today and what have you embedded for markdowns in the gross margin guide. Meghan Frank -- Chief Financial Officer So in terms of sales in the U.S., so we did come into the quarter and saw a negative traffic trend industrywide, which is impacting us. Similar conversion, I'd say, to what we experienced in Q4. And then, we've seen an improvement in AOV and specifically UPTs. Really a reaction to the newness in our assortment. And again, feel that positions us well for when traffic rebounds. So, Q1 trends for the U.S. not materially different than Q4. And then, in terms of inventory, I'm pleased with the level and composition of the inventory. We offered some color on high teens growth, and it's really related to just the cadence of our inventory as we move through this year, being in a good in stock position in core, bringing in newness. And we also are expecting flat markdowns for both Q1 and the full year at this point in time. Matthew Boss -- Analyst That's great color. Best of luck. Operator And the next question is from Janine Stichter with BTIG. Please go ahead. Janine Stichter -- Analyst Hi. Thanks for taking my question. Question for Meghan. I was hoping you could just elaborate a bit on your SG&A philosophy. With the guidance you gave for the average of 40 to 50 basis points this year, if we see better sales, would we expect it to still be in that range, or would you put more into SG&A? Or on the flip side, if we have sales come in weaker, maybe just elaborate on some of the areas where you might have some flex. Thank you. Meghan Frank -- Chief Financial Officer Yep, thank you. So, as I mentioned, we do have a headwind in FX for the year and in terms of how that impacts SG&A. It's about half of the 40 basis point FX headwinds, the 20 basis points impacting SG&A. And then, also, as I mentioned, we are still investing behind our Power of Three x2 roadmap. So, continuing to support our international strategy, our store expansion strategy across the globe. Marketing and brand, as Calvin mentioned, going after that unaided brand awareness piece. And then, another one I'd was just tech in terms of foundational investments and data analytics. And, you know, I think it will depend on the environment and the business dynamics in terms of where SG&A moves with either increasing or decreasing sales. We always have contingencies across the business, both on the upside and downside, and will depend on the momentum we're seeing in the business and the current environment in terms of how we approach that. Janine Stichter -- Analyst Great, thanks so much. Meghan Frank -- Chief Financial Officer Yeah. Operator The next question is from Aneesha Sherman with Bernstein. Please go ahead. Aneesha Sherman -- Bernstein -- Analyst Thank you so much. So, Meghan, talking about the Americas versus international growth, you talked about a kind of low to mid single-digit outlook for the Americas, that would put international growth quite a bit lower than what you did in 2024. Can you give some color around where you may be seeing a slowdown internationally or their particular markets and what gives you -- you know, what your assumption is coming from? And then, a quick follow-up on your levels of investments. You talked about foundational investments, strategic investments, marketing. Can you talk about how flexible the cost base is to the downside in the event of a tougher macro scenario? What would margin progression look like? Thank you. Meghan Frank -- Chief Financial Officer Yep. So, in terms of revenue by geography, as I said, we're offering color on America's low single digit to mid single digit for the year, and China 25% to 30%; rest of world, approximately 20%. So, you know, we're being thoughtful in our planning, looking at current trends of the business and the forward outlook in terms of the environment. So, a little bit below what's embedded in our five-year CAGR, but we remain ahead of schedule and really pleased and committed to that long-term target there. And then, in terms of flex across the P&L, as I just mentioned, you know, we do have a number of contingency levers dependent on business outlook. At this point in time, I would say, we remain really focused on the long term and driving into our long-term opportunity while navigating some near-term headwinds, particularly with FX and tariffs. Operator The next question is from Michael Binetti with Evercore. Please go ahead. Michael Binetti -- Analyst Hey, guys. Thanks for taking our question here. So, Meghan, you started the year guiding gross margin flat and finished up 65 basis points in the U.S., you know, slowed from where you thought it was going to be in the year. Can you just help -- I know you offered some comments on 4Q. But when you look at the year in total, what went different than you thought earlier in the year? And I'm curious where, as you look at 2025, do those pockets of conservatism still exists or where do you see conservatism in the guidance for the year, both in gross margin again, as well as in sales and SG&A? Meghan Frank -- Chief Financial Officer Yep. Thanks, Michael. So, I would say in terms of what played out differently, you know, top line, I think we saw a little bit of an outperformance as we moved to close out the year, which would provide a little bit of leverage in terms of gross margin. We also mixed a little bit differently by category and saw an IMU benefit from that, as well as some reduced freight rates impacting our gross margin in '24. So, you know, believe we're well-positioned in our guidance in terms of 25. You know, the mix of business could come up -- could come out different there as well as the top line outlook could impact our leverage point. But I would say at this point in time, our current view on mix of business and revenue outlook is embedded in our guidance core. Michael Binetti -- Analyst Thank you. Operator The next question is from John Kernan with TD Cowen. Please go ahead. John Kernan -- Analyst Good afternoon. Thanks for taking my question. Meghan, it looks like marketing went up to about 5% of sales this year. It's still below some of your bigger peers. I think it's up about 50 basis points year over year. How do you think about marketing within fiscal '25 and also long term? Is this something you're, given all the activations that Calvin talked to earlier, that you can flex up to drive faster sales in the Americas? Meghan Frank -- Chief Financial Officer Yeah. So, marketing was an area where when we navigated last year and some of the challenges we had with newness and looked across our P&L investments. We maintained our investment in marketing, and we did see our penetration of sales tick up a little bit to that 5% range. That's what we're expecting as we move into '25. It is definitely an area we were closely monitoring. We've got a lot of excitement in terms of product newness and active marketing activations as we move throughout this year. So, dependent on business trend, it's an area we would look to flex if that's appropriate. John Kernan -- Analyst Got it. Thank you. Operator The next question is from Paul Lejuez with Citi. Please go ahead. Paul Lejuez -- Analyst Hey. Thanks, guys. On the traffic slowdown, I think you specifically mentioned the U.S. But can you talk about what you saw in the other regions, including Canada, including China, international, or rest of the world? And anything within the U.S. that you could call out regionally? Obviously, there's been some unfavorable weather in the first quarter. Curious if you're seeing any impact from that. Thanks. Meghan Frank -- Chief Financial Officer Yeah. So, in terms of traffic, I would say the notable trend we saw with that shift in the U.S., nothing materially different in terms of either Canada or the international markets. I would call out just the difference in lunar new year timing, the shift in the timing this year. It does have a little bit of a headwind on Q1 in terms of our China trend overall international. And then, in terms of U.S. regional, we aren't seeing any meaningful differences regionally. And in terms of weather, I would say, really focused on what we can control. Paul Lejuez -- Analyst Thanks. Good luck. Meghan Frank -- Chief Financial Officer Thank you. Operator The next question is from Ike Boruchow with Wells Fargo. Please go ahead. Ike Boruchow -- Analyst Hey. Thanks for taking the question. Just to keep going with the U.S., is this -- is what you're seeing more broad-based? Is it more on the women's side, more on the men's side? Just kind of curious what you see there. Then, given your talk of the innovation and newness flowing through as the year progresses, it sounds like you're baking in like essentially no improvement in North America trend from here. Shouldn't we be expecting North America -- I'm sorry, I mean, the U.S. specifically to improve as the year progresses given the merchandise flow that you're speaking to? Calvin McDonald -- Chief Executive Officer and Director Thanks, Ike. In terms of difference between the men's and women's business, we haven't seen any material notable change from the fourth quarter, which we talked about with women's up six, men's up 12. The big opportunity in newness last year was really in our women's business, and we've gone back to at par on that. And she has responded, as I mentioned, across some of those metrics I shared, UPT, average order size. So, I think that is definitely a positive for us being back in a traditional mix of newness and innovation across the assortment for her. We are seeing good results to that. And I'll let Meghan reference the second part. Meghan Frank -- Chief Financial Officer Yeah. So, we are guiding 6% to 7% in Q1 and then 7% to 8% for the full year. The Americas came in at 3% growth for '24. And we offered color low single digit to mid single digit. So, I would say that range captures, you know, a potential uptick there but being thoughtful in terms of how we're planning the business, given some of the uncertainty this year. Ike Boruchow -- Analyst Fair enough. Operator The next question is from Jay Sole with UBS. Please go ahead. Jay Sole -- Analyst Great. Thank you so much. Would it possible to clarify on the square-footage growth how much square-footage growth you're planning for the U.S. this year and also how much square-footage growth you're planning for China? Thank you. Meghan Frank -- Chief Financial Officer We're not breaking up the specifics on square-footage growth, but what I can offer is we've got 40 to 45 net new openings for the year, square-footage growth of 10%, which is in line with our Power of Three x2 target of low double digits. North America is about 10 to 15 openings. Within that, the balance is international. The majority of those would sit in China. And we'll continue to keep you updated as we move throughout the year. Jay Sole -- Analyst And then, on some of the store ads happening in the U.S., are you upsizing stores in the U.S. this year? Meghan Frank -- Chief Financial Officer Yep, we continue to pursue our optimization strategy. So, we had a total of, globally, 39 optimizations in 2024, and we're currently planning 40 for 2025 globally. Jay Sole -- Analyst Got it. Thank you so much. Meghan Frank -- Chief Financial Officer Thank you. Operator That's all the time we have for questions today. [Operator signoff] Duration: 0 minutes Howard Tubin -- Vice President, Investor Relations Calvin McDonald -- Chief Executive Officer and Director Meghan Frank -- Chief Financial Officer Alex Straton -- Analyst Brooke Roach -- Analyst Dana Telsey -- Analyst Lorraine Hutchinson -- Analyst Matthew Boss -- Analyst Matt Boss -- Analyst Janine Stichter -- Analyst Aneesha Sherman -- Bernstein -- Analyst Michael Binetti -- Analyst John Kernan -- Analyst Paul Lejuez -- Analyst Ike Boruchow -- Analyst Jay Sole -- Analyst More LULU analysis All earnings call transcripts This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Lululemon Athletica. The Motley Fool has a disclosure policy. Lululemon Athletica (LULU) Q4 2024 Earnings Call Transcript was originally published by The Motley Fool Sign in to access your portfolio
