Here's our initial take on Lululemon Athletica's (LULU 1.81%) fiscal 2024 fourth-quarter financial report.
Key Metrics
| Metric | Q4 2023 | Q4 2024 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $3.21 billion | $3.61 billion | +13% | Beat |
| Earnings per share | $5.29 | $6.14 | +16% | Beat |
| Comparable sales | +12% | +3% | -9 pps | n/a |
| Gross margin | 59.4% | 60.4% | +1 pp | n/a |
Weak Guidance Overshadows a Solid Quarter
Lululemon delivered in the fourth quarter of 2024, growing revenue by 13%, or by 8% when excluding an extra week in this year's quarter. International revenue soared by 38% year over year, driven by new stores and a 20% rise in comparable sales. Revenue in the Americas was up 7%, with flat comparable sales growth. Taken together, Lululemon was able to beat analyst estimates for both revenue and earnings.
While Lululemon's fourth-quarter performance beat expectations, its guidance for 2025 did not. Lululemon is struggling with increased competition as well as a tough macroeconomic environment. Management said it expects revenue to grow by just 5% to 7% in fiscal 2025 to a range of $11.15 billion to $11.30 billion. The consensus analyst estimate was $11.31 billion, fully above that range.
Lululemon CEO Calvin McDonald noted that the company was introducing "more newness and innovation" into its product lineup, but this won't help prevent a slowdown in 2025. Fresher brands like Vuori and Alo Yoga are threatening Lululemon's dominance, and the prospects of an economic slowdown are likely weighing on demand as well.
NASDAQ: LULU
Key Data Points
Immediate Market Reaction
Shares of Lululemon were trading down about 6% in early after-hours trading soon after the fourth-quarter report was released. While the company beat analyst estimates across the board in the fourth quarter, its outlook for 2025 was not well received by the market. The stock has been volatile over the past few years, with little change compared to three years ago. With a mixed bag of an earnings report, the stock could continue to be stuck for the time being.
What to Watch
While Lululemon faces a tough competitive landscape and an equally tough economic backdrop, the company's brand remains a powerhouse in the industry. International growth continues to be impressive, although the company certainly has work to do in the U.S. to restart comparable sales growth. 2025 won't be a great year for Lululemon, but doubling down on innovation and new products could help turn the tide further down the road.
