On September 4, Canadian sportswear giant Lululemon Athletica released its financial results for the second quarter of fiscal 2025. Net revenue reached $2.5 billion, up 7% year over year, supported by solid growth in international markets. However, weakness in the U.S. business weighed on overall performance, casting a shadow over the company’s growth trajectory.
Gross margin declined to 58.5%, down 1.1 percentage points from the prior year, while operating income slipped 3% to $523.8 million. At first glance, the numbers appear stable, but the slowdown in the U.S. market was evident throughout the quarter.
Chief Executive Officer Calvin McDonald commented, “While we continued to see positive momentum overall in our international regions in the second quarter, we are disappointed with our U.S. business results and aspects of our product execution. We have closely assessed the drivers of our underperformance and are continuing to take the necessary actions to strengthen our merchandise mix and accelerate our business. We feel confident in the opportunity ahead and plans we have in place to drive long-term growth.”
The biggest blow to investors came from the company’s revised full-year guidance. Net revenue is now expected to range between $10.85 billion and $11.0 billion, down from the previous forecast of $11.15 billion to $11.30 billion. Earnings per share (EPS) are projected at $12.77 to $12.97, compared with the earlier estimate of $14.58 to $14.78.
Chief Financial Officer Meghan Frank explained: “In the second quarter, we exceeded expectations on EPS, but revenue fell short of our guidance driven predominantly by our U.S. business. We are also navigating industry-wide challenges, including higher tari rates. In light of these dynamics, we are revising our full year outlook. As we begin the back half of the year, our brand and balance sheet remain strong, and we will continue to exercise financial discipline and strategically invest in our growth potential.”
According to the company, tariffs are expected to weigh on results by about $240 million this fiscal year, reflecting higher U.S. import duties and the removal of the “de minimis” exemption.
By region, revenue in the Americas grew just 1%, while mainland China surged 25% and international markets overall climbed 22%. Despite its expanding global presence, the slowdown in its largest market, the United States, rattled investor confidence. Shares tumbled about 13% in after-hours trading following the announcement.
With inflation, weakening consumer sentiment, and uncertain U.S. trade policy creating headwinds, Lululemon’s ability to leverage its “brand strength” and “product power” to regain momentum in the U.S. will be key to shaping its future.
Copyright © 2025 Oui Speak Fashion. All rights reserved.