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Lululemon Faces Margin Pressures and Uneven Global Growth in Q1 2025
9 Aug
Summary
- Wells Fargo analyst downgrades Lululemon's price target due to concerns
- Lululemon's Q1 2025 revenue up 7% but US sales down 2% while China surges 19%
- Company expects Q2 2025 revenue growth of 7-8% and EPS of $2.85-$2.90
As of August 9th, 2025, Lululemon Athletica Inc. (NASDAQ:LULU), the Canadian athletic apparel company, is facing a mix of challenges and opportunities. In the first quarter of 2025, the company's net revenue increased by 7% year-over-year to $2.4 billion, while diluted earnings per share (EPS) rose slightly from $2.54 in Q1 2024 to $2.60.
However, the performance was uneven across different regions. While the company's international net revenue surged by 19%, with comparable sales rising by 6%, the Americas' net revenue increased by only 3%, and comparable sales decreased by 2%. Overall, company-wide comparable sales increased by 1%.
This uneven performance has raised concerns among analysts. On August 4th, Wells Fargo analyst Ike Boruchow lowered the firm's price target on Lululemon from $270 to $225, while maintaining an Equal Weight rating on the shares. The firm cited three key concerns: the lack of US comparable sales visibility, the China growth trajectory, and potential margin headwinds in the second half of 2025.
Despite these challenges, Lululemon remains optimistic about its future. For the second quarter of 2025, the company projects net revenue to be between $2.535 and $2.560 billion, representing a growth of 7% to 8%. Diluted EPS is expected to be in the range of $2.85 to $2.90.
