The logo for Lululemon Athletica is seen outside a retail store in New York

Following the release of its first quarter results, popular apparel brand Lululemon expects that its second quarter will be affected by tariffs eating up the brand's profits. This follows after its stocks plummeted after its Q1 results failed forecast expectations in the industry, given how other apparel brands are seeing comebacks to boost their offerings in the US market.

Strong Q1 Results–But America's Sliding Back Slightly

Lululemon reported strong Q1 FY2025 results, with total revenue rising 7% year-over‑year to $2.4 billion (£1.77 billion) at 8% constant-currency and diluted EPS climbing to $2.60 (£1.92), up from $2.54 (£1.88) in Q1 2024. Gross profit grew 8% to $1.4 billion (£1.04), while gross margin expanded by 60 basis points to 58.3%.

Comparable sales rose 1% overall, though the Americas slightly declined. At the same time, international markets, particularly China, delivered solid growth–amidst the company's decision to repurchase 1.4 million shares and open three net new stores.

Despite top‑line strength, shares dipped over 20% in after-hours trading following a cautious full-year EPS guidance cut to $14.58–$14.78 (£10.78-£10.93), citing increased tariffs and cost pressures.

How Is Lululemon Aiming to Fix Tariff Issue

Lululemon CEO Calvin McDonald noted that customers have responded positively to recent product innovations to solve the company's 'newness problem.' However, he acknowledged that US consumers remain cautious and deliberate with their purchases.

'We're making progress on our assortment, and we've seen a good response to many of our innovations. But I sense that in the US, consumers remain cautious right now and are being very intentional about their buying decisions. Even with this, we gained market share across both men's and women's in the premium athletic wear market in the United States,' Calvin explained during Lululemon's earnings call.

Meanwhile, CFO Meghan Frank said that Lululemon will implement modest, selective price increases across a small portion of its product lineup to address rising tariffs.

'When we think about the tariff impact on mitigation actions, I'd highlight one would be pricing. We plan to take strategic price increases, looking item by item across our assortment as we typically do. It will be price increases on a small portion of our assortment, and they will be modest,' Frank explained.

'Not Happy With Growth at US'

In the same earnings call, Calvin addressed a question from Goldman Sachs on what the company thinks of returning the US business to sustainable comp growth. He stated that by looking at their performance versus the market, the brand has gained market share in premium activewear. Nonetheless, Calvin opined about his thoughts on the current US market.

'We're not happy where the growth is in the US, but relative to the market and our performance versus others, pleased that we're putting on share, pleased with the reaction to the newness and the mix of newness that's coming,' he explained.

It is worth noting that brand activations and campaigns, such as Summer of Align, contributed to the sequential rise in unaided US awareness, reflecting the brand's ongoing investment in grassroots and omnichannel engagement.

Looking Ahead

Despite challenges navigating the US market, Calvin believes that its growth across channels, categories, and markets is still a key factor in its growth as a brand.

'As we navigate the dynamic macroenvironment, we intend to leverage our strong financial position and competitive advantages to play offence while we continue to invest in the growth opportunities in front of us,' he added.

Meanwhile, Meghan added, '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.'

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