Sunita Somvanshi
Lululemon’s stock plunged approximately 17-19% after Thursday’s Q2 earnings call when CEO Calvin McDonald admitted what many customers might have already felt about their product lineup.
“We have become too predictable within our casual offerings,” McDonald told investors plainly, as the athleisure giant shared numbers that showed trouble in its home market.
The company’s Q2 revenue reached $2.5 billion, growing 7% from last year (6% in constant currency). While the $3.10 earnings per share beat some expectations, the forecast changes told the real story.
Lululemon cut its yearly revenue outlook to $10.85-$11 billion, falling short of the $11.18 billion analysts wanted. Profit guidance dropped even more sharply to $12.77-$12.97 per share, far below the $14.45 Wall Street expected.
The company faces a growing split between regions. Sales in the Americas barely grew at 1%, with same-store sales actually falling 4%. U.S. softness has appeared in recent quarters. Meanwhile, international markets jumped 22% with same-store sales up 15%, fueled by strong results in Asia-Pacific and Europe.
Similar Posts
CFO Meghan Frank explained how recent trade policy changes would hurt: “The removal of the de minimis exemption will significantly affect the company, representing roughly 1.7 percentage points of the 2.2 percentage-point tariff-related decline in profit expected for the year.”
This equates to about a $240 million impact to full-year profit for 2025.
The financial pressure shows in the margins – gross margin fell 110 basis points to 58.5%, while operating margin dropped 210 basis points to 20.7%. The tax rate also increased from 29.6% to 30.5%.
McDonald’s plan to fix things centers on refreshing their products, increasing new styles from 23% to 35% of their lineup. “We have become too predictable within our casual offerings and missed opportunities to create new trends,” he stated.
Despite these challenges, Lululemon continued buying back shares, repurchasing 1.1 million for $278.5 million in Q2. The company also added 14 new stores, bringing its total to 784 worldwide.
With shares already down over 45% this year before this latest drop, Lululemon must now prove it can make its products exciting again while dealing with higher costs.
The company’s struggles mirror broader issues in the fast fashion industry, where consumer expectations for constant newness clash with production realities. Unlike some competitors who have faced criticism for environmental impacts, Lululemon has positioned itself in the premium segment, though all apparel makers face increasing scrutiny over their manufacturing footprints.
Some brands have found success through sustainable approaches to fashion, while others work to balance fast production with sustainability goals. For Lululemon, the immediate challenge remains revitalizing product lines while navigating new economic headwinds.
Lululemon reported Q2 FY2025 revenue of $2.5 billion, with EPS of $3.10. The company lowered its full-year guidance, citing a $240 million tariff-related profit reduction and slower U.S. sales. International markets delivered strong growth, while the Americas saw a decline in comparable sales. The CEO outlined plans to refresh product offerings, and the CFO detailed cost-saving measures. Shares fell sharply following the announcement.
