Lululemon (LULU) reported solid first-quarter results for fiscal 2025, delivering $2.37 billion in net revenue, a 7% increase year-over-year (8% on a constant dollar basis), underscoring the brand’s ongoing global momentum despite regional contrasts and evolving margin dynamics. Growth was primarily fueled by international markets, where revenue surged 19%, including 21% growth in China Mainland and 16% in the Rest of World regions, highlighting expanding brand penetration and new store openings. In contrast, the Americas posted a more modest 3% revenue gain, with comparable sales declining 2%, reflecting continued U.S. consumer caution despite market share gains in premium activewear.

Gross profit rose 8% to $1.38 billion, with gross margin improving 60 basis points to 58.3%, supported by lower product costs and better markdown management. However, operating income edged up only 1% to $438.6 million, and operating margin contracted 110 basis points to 18.5%, pressured by elevated SG&A spending ($943 million, or 39.8% of revenue) tied to FX revaluation losses and strategic investments. Net income dipped 2% to $314.6 million, while diluted EPS rose slightly to $2.60, up from $2.54 a year earlier.

Digital sales continued to impress, growing 9% and comprising 41% of total revenue ($961 million), while store sales increased 8%, bolstered by a 14% rise in square footage. Product innovation remains a key strength, with new collections like Daydrift and Be Calm resonating well with customers. Across categories, men’s, women’s, and accessories all posted 8%, 7%, and 8% revenue growth, respectively.

Inventory levels rose 23% to $1.7 billion, outpacing revenue growth, though management expressed confidence in inventory quality and flexibility, with 40% of inventory in core product. The company repurchased 1.4 million shares for $430.4 million during the quarter and ended with $1.3 billion in cash and no debt, maintaining a strong balance sheet to support ongoing investments.

Looking ahead, Lululemon reaffirmed its full-year revenue guidance of $11.15–$11.3 billion and EPS of $14.58–$14.78, despite forecasting margin headwinds from tariffs, occupancy costs, and FX. Gross margin is expected to decline by approximately 110 basis points, while operating margin could fall by 160 basis points. Q2 revenue is projected at $2.535–$2.56 billion, with EPS between $2.85–$2.90, although gross margin is anticipated to dip by around 200 basis points due to tariff pressures.

While challenges remain, particularly in the U.S. market and on the cost side, Lululemon’s international strength, product innovation, and disciplined execution position it well for long-term growth. The company plans to open 40–45 new stores this year, mainly in China, continuing its strategic global expansion.