Lululemon reported a slump in sales in the Americas last quarter, with shares plummeting 15.5% in extended trade after the company predicted a US$240 million (A$368.2 million) tariff-induced hit to profits.
Revenue was $2.53 billion, up 7% year-over-year and missing LSEG estimates of $2.54 billion. Earnings per share were $3.10, falling from $3.15 but above estimates of $2.88.
“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,” said Lululemon CEO Calvin McDonald.
“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.”
Comparable sales increased 1% overall, but Americas comparable sales dropped by 4%. International comparable sales were up 15%, driven by a 17% surge in China.
Income from operations fell by 3% to $523.8 million. Gross profit was up 5% to $1.5 billion, through its gross margin declined by 110 basis points to 58.5%.
The company’s third quarter guidance includes revenue of $2.47-2.50 billion, with earnings per share of $2.18-2.23. This fell below estimates of $2.57 billion in revenue and $2.93 in earnings per share.
Its full-year guidance also includes a $240 million cut to gross profit due to the United States’ tariffs, as well as the removal of its de minimis exemption that had exempted packages worth under $800 from paying import taxes.
The end of the de minimis exemption is set to account for around 1.7 percentage points of the company’s projected 2.2% decrease in profit in 2025, according to Lululemon CFO Meghan Frank.
Lululemon’s (NASDAQ: LULU) share price fell to $174.10 in after-hours trading, following a close at $206.09. Its market capitalisation is $24.70 billion.
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