Lululemon Lowers Full-Year Sales Forecast After First-Quarter Results

Lululemon reported net income of $195 million, or $1.69 per share, for the three months ended May 3. Revenue reached $2.47 billion, up 4 percent from $2.37 billion a year earlier. Comparable sales rose 1 percent, above the 0.4 percent analysts had projected.

In the Americas, comparable sales fell 5 percent, the fifth consecutive quarter of declines. International sales grew 22 percent and comparable sales rose 13 percent.

Gross margin declined 4.1 percentage points to 54.2 percent. Tariffs accounted for 2.8 percentage points of the drop and increased markdowns contributed 0.4 percentage points. The company expects gross margin to fall another 4.1 percentage points in the current quarter.

For the full year, it projects a 0.9 percentage-point decline, with markdowns flat to slightly higher. Lululemon said it expects to offset nearly all of the tariff impact over the course of the year. It also noted that a prior duty-free shipping arrangement across the Canadian border into the United States is no longer available.

The company hired a new chief executive who will start in September. It also settled a proxy contest with its founder. Lululemon said slower sales trends in the second quarter will require additional seasonal clearance markdowns. It expects China sales to rise in the mid-to-high teens percent range this quarter and about 20 percent for the full year.