Lululemon‘s troubles are far from over. 

The athletic apparel retailer lowered its full-year guidance and issued a weak current-quarter outlook on Thursday as interim CEO Meghan Frank blamed “negative commentary in the media” and recent product launches that failed to wow shoppers.

“We experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top line performance,” Frank told analysts during the company’s earnings call while explaining why the company’s performance declined at the end of its fiscal first quarter. “And second, not all of our product launches have met our expectations. While we’ve had several successful launches so far this year, we’ve seen others as we start Q2 not generate the anticipated guest response.”

When pressed on what specific negative commentary led to a decline in sales, Frank pointed to Lululemon’s proxy contest with founder Chip Wilson, who was outspoken in his criticism of the brand, as well as “questions about the composition” of some of its products.

“These stories have died down and subsided,” said Frank. “But we have not yet seen a return to our pre-disruption … trends.”

She said the company is “not sitting still” and is “moving with urgency to make the necessary adjustments to reaccelerate momentum, particularly in North America.”

The company’s shares dropped 11% in extended trading following the report. Lululemon’s stock has plunged about 40% this year as of Thursday’s close.

Lululemon is now expecting fiscal 2026 sales to be between $11 billion and $11.15 billion, down from a previous range of between $11.35 billion and $11.50 billion. Analysts were expecting full-year sales of $11.48 billion, according to LSEG. 

Lululemon also cut its earnings guidance by more than $1 per share. It’s now expecting earnings per share to be between $10.95 and $11.15 for the year, down from a previous range of $12.10 to $12.30. Analysts were expecting $12.30 per share, according to LSEG. 

The current quarter doesn’t look much better. Lululemon is expecting sales to be between $2.45 billion and $2.48 billion, below expectations of $2.60 billion, according to LSEG. It’s expecting earnings per share to be between $1.76 and $1.81, well below expectations of $2.68, according to LSEG. 

While Lululemon’s guidance failed to meet forecasts, it did beat expectations on the top and bottom lines during its fiscal first quarter, albeit on expectations that have come down significantly since the retailer last reported earnings. Here’s how the company performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: $1.69 vs. $1.68 expected 
• Revenue: $2.47 billion vs. $2.43 billion expected 

The company’s reported net income for the three-month period that ended May 3 was $195 million, or $1.69 per share, compared with $314.6 million, or $2.60 per share, a year earlier. 

Sales rose to $2.47 billion, up about 4% from $2.37 billion a year earlier. Comparable sales grew 1%, better than expectations of 0.4%, according to LSEG.

Lululemon’s woes have been centered on the Americas, its largest and most important region. During the quarter, comparable sales fell 5% in the market, marking the fifth straight quarter of declines. Lululemon’s overall business is still growing, but it has primarily seen that expansion in China and in other international regions, which make up a fraction of overall revenue. 

During the quarter, international sales grew 22% while international comparable sales grew 13%.

Lululemon said it expects its declines in North America to continue. It anticipates sales will fall by a low-double digit percentage in the current quarter and by a high-single digit percentage for the full year. Meanwhile, it expects China sales will rise by a mid-to-high teens percentage during the current quarter and by about 20% for the full year.

Sales have been a sore spot for Lululemon, but profitability has been an even larger challenge. During the quarter, gross margin decreased a staggering 4.1 percentage points to 54.2%, worse than expectations of 54.6%, according to StreetAccount. The company was a large beneficiary of the now defunct de minimis exemption, which allowed it to ship packages duty free across the Canadian border into the U.S., and has also been hit hard by tariffs.

With fewer people coming to its stores and website to buy workout clothes, the company has also leaned more on discounting to drive sales, which has hurt its bottom line and its reputation as a premium brand.

It’s also spent the last six months in a dramatic proxy contest with its founder, which was costly and took management’s attention away from its turnaround.

In addition to all of those struggles, Lululemon, like everyone else, has also had to contend with a new conflict in the Middle East and surging gas prices, which are also increasing costs.

The company said the decline in its gross margin during the quarter was primarily attributable to tariffs, which impacted margins by 2.8 percentage points, and discounts, which grew 0.4 percentage points. The company expects gross margin to fall by another 4.1 percentage points during the current quarter, driven by higher tariffs and store investments. It anticipates markdowns will be 0.5 percentage points higher. 

“While we continue to expect markdowns to improve modestly year over year in the second half,” said Frank. “The slower expected top line trends in Q2 will necessitate additional seasonal clearance.”

Lululemon expects its profitability challenges will moderate in the back half of the year. For the full year, the company anticipates gross margin will fall 0.9 percentage points, with markdowns flat to slightly higher. On a full-year basis, Lululemon expects to offset nearly all of its tariff impact, Frank said.  

In the three months since Lululemon last reported earnings, its made some progress on addressing some of its challenges. It hired longtime Nike veteran Heidi O’Neill to be its next CEO and settled its proxy battle with its founder. Investors are likely to be relieved Lululemon’s management team no longer has to put its focus and cash behind the proxy contest, but some are still feeling sour over O’Neill’s appointment, particularly because she won’t be able to start until September. 

Under the direction of two interim CEOs, CFO Frank and Chief Commercial Officer André Maestrini, Lululemon has been working to rebuild its product assortment and address its domestic growth challenge. But the real strategy changes won’t come until O’Neill starts. 

Given how long it takes for Lululemon to get from product idea to market, there’s concern that it’ll take even longer than expected to fix the challenges that have been weighing on its business. 

Still, Lululemon has contended that O’Neill is the right person for the job. While at Nike, O’Neill established and built Nike’s women’s business and grew it into a multibillion-dollar franchise. She also worked to reduce product lead times – experience that will serve her as Lululemon’s chief executive. Already, the company has made progress in reducing lead times from 18-to-24 months to 15-to-16 months and is working to further bring it down to between 12 and 14 months, Frank said.

The U.S.-Iran ceasefire will not expire on Wednesday afternoon after all. 

Vice President Jagdeep Dhankhar resigned from his post on Monday, citing health concerns and the need to prioritise medical care. The resignation, addressed to President Droupadi Murmu, is effective immediately and has been made under Article 67(a) of the Constitution.

In his letter, Dhankhar expressed gratitude to the President for her “unwavering support” and the “soothing, wonderful working relationship” they shared during his tenure. 

He also thanked Prime Minister Narendra Modi and the Union Council of Ministers, calling their support “invaluable.”

“I have learned much during my time in office,” he said, adding that the warmth and affection shown by Members of Parliament would remain embedded in his memory.

Describing his tenure as Vice President as a period of insight and privilege, Dhankhar wrote that it had been a satisfaction to witness and take part in India’s economic progress. “Serving in this transformative era of our nation’s history has been a true honor,” he said.

As he stepped down, Dhankhar said he was filled with pride in “Bharat’s global rise” and expressed confidence in the country’s future.

Dhankhar, 74, assumed office as the 14th Vice President in August 2022. A senior advocate by training and former Governor of West Bengal, before he took charge as VP, Dhankar had prolonged confrontation with the Mamata Banerjee government in the state. 

He had targeted the state government and the state’s ruling party on issues ranging from allegations of corruption, political violence and politicisation of the administration and academic institutions to an alleged undemocratic attitude.

Source: Indian Express

–Agencies 

Lululemon beat Wall Street expectations for fiscal first-quarter earnings Thursday, but cut its full-year earnings guidance, citing a “dynamic macroenvironment.”

As the company navigates tariffs and fears about a slowing U.S. economy, CEO Calvin McDonald said in a news release that “we intend to leverage our strong financial position and competitive advantages to play offense, while we continue to invest in the growth opportunities in front of us.”

He said on a conference call with analysts that he is “not happy” with U.S. growth and said U.S. consumers are being cautious and intentional about their buying decisions.

Chief Financial Officer Meghan Frank added on the call that the brand is planning to take “strategic price increases, looking item by item across our assortment,” to mitigate the effect of tariffs.

“It will be price increases on a small portion of our assortments, and they will be modest in nature,” she said, adding that those hikes will start rolling out toward the second half of the current quarter and into the third quarter.

Shares of the apparel company plunged about 20% on Friday.

Here’s how the company did for its first quarter compared with what Wall Street was expecting for the quarter ended May 4, based on a survey of analysts by LSEG:

• Earnings per share: $2.60 vs. $2.58 expected
• Revenue: $2.37 billion vs. $2.36 billion expected

The company cut its full-year earnings guidance. It expects its full-year earnings per share to be between $14.58 to $14.78. Previously, it expected full-year earnings per share to be in the range of $14.95 to $15.15 for the year. Analysts anticipated earnings per share of $14.89, according to LSEG.

Lululemon’s report comes after a string of retailers reduced or withdrew their guidance and said they would hike prices because of uncertainty surrounding President Donald Trump’s tariff regime. Retailers including Abercrombie & Fitch and Macy’s slashed their profit outlooks, while others, including American Eagle Outfitters pulled their full-year guidance altogether.

Among Lululemon’s rivals in the athleticwear category specifically, Gap, which owns athleisure brand Athleta, reported last week that it expects tariffs to impact its business by $100 million to $150 million. Nike told CNBC last month it would begin raising prices on a wide range of products, though it did not specify whether tariffs were the reason for the hikes. 

On Thursday’s earnings call, McDonald acknowledged the uncertainty that tariffs have brought on the business, but said he believes the brand is “better positioned than most” to navigate the current environment.

Lululemon reported net income for the fiscal first quarter of $314 million, or $2.60 per share, compared with a net income of $321 million, or $2.54 per share, a year earlier.

First-quarter revenue rose to $2.37 billion, up from about $2.21 billion during the same period in 2024.

Lululemon expects second-quarter revenue to total between $2.54 billion and $2.56 billion. It also anticipates full-year fiscal 2025 revenue to be $11.15 billion to $11.3 billion — unchanged from its last forecast. Wall Street analysts were expecting revenue of $2.56 billion for the second quarter and $11.24 billion for the full year, according to LSEG.

The activewear company expects to post earnings per share in the range of $2.85 to $2.90 for the second quarter, compared to Wall Street’s expectation of $3.29, according to LSEG.

Frank said on the earnings call that the company’s outlook assumes the current 30% incremental tariff on China and an incremental 10% levy on the remaining countries where the retailer sources from.

During 2024, 40% of Lululemon’s products were manufactured in Vietnam, 17% in Cambodia, 11% in Sri Lanka, 11% in Indonesia, 7% in Bangladesh and the remainder in other regions, according to the company’s annual report. Lululemon does not own or operate any manufacturing facilities and relies on suppliers to produce and provide fabrics for its products, according to the report. 

Comparable sales rose 1% year over year for the quarter, compared to the 3% Wall Street was anticipating, according to StreetAccount. That number includes a 2% decrease in the Americas and a 6% increase internationally.

Gross margin was 58.3%, ahead of the 57.7% that analysts had expected, according to StreetAccount.

However, Frank said on the earnings call that Lululemon expects full-year gross margins to decrease approximately 110 basis points versus 2024, down from its prior guidance of a 60-basis point drop. She said the difference is driven predominantly by increased tariffs.

As of Thursday’s close, LULU stock had dropped about 13% year-to-date.

Seeing a 3-year low valuation in Reliance Industries Ltd (RIL) shares, global brokerage firm Bernstein has raised its target price on the stock to Rs 1,640, implying a potential upside of 15.4% from the stock’s previous close, while maintaining an ‘outperform’ rating on the same.

It should also be noted that Bernstein’s target price on the stock is even higher than the latter’s 52-week high of Rs 1,608.95 on the BSE.

The revision in the target price comes on the back of the brokerage firm citing strengthening growth momentum, an improving earnings outlook, coupled with supportive valuations.

Bernstein noted that Reliance is nearing the end of a major store rationalization cycle in its retail segment, which involved the closure of over 2,100 underperforming stores in FY2025. With that process largely complete, the brokerage expects a shift from aggressive expansion to steady revenue and EBITDA growth. Bernstein has projected a compound annual growth rate (CAGR) of 16% and 20% for revenue and EBITDA, respectively, over FY2025–27 in the retail segment.

On the telecom front, continued tariff repair is expected to support earnings growth. Bernstein forecasts 13% CAGR in revenue for Jio over the next two years, supported by rising ARPU (average revenue per user) and further rollout of Jio AirFiber. The brokerage anticipates subscriber additions and growing broadband adoption to drive further gains, with Jio expected to reach a subscriber base of 500 million and a market share of 48% by FY27.

In the new energy segment, Reliance’s ventures in solar, battery, electrolyzers, and fuel cells are gaining traction. The company has commenced operations with a 1GW production line and aims to reach 10GW capacity by 2026. Bernstein highlighted this segment as a long-term growth pillar, supported by the company’s planned investment of US$2 trillion through 2050.’Also read: No betting on market till July; AI companies to take a couple of years to take off in India: Ajay Bagga

Bernstein also underlined Reliance’s disciplined approach to capital allocation, with capital expenditure moderating and the net debt to EBITDA ratio remaining flat in FY2025. At a current 10.1x one-year forward EV/EBITDA multiple, the stock trades at a 15% discount to its three-year average valuation, making the risk-reward ratio attractive, the brokerage said.

Around 12:40 pm today, the shares of Reliance Industries were trading 0.89% lower at Rs 1,408.10 on the BSE.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

A U.S. trade court on Wednesday blocked President Donald Trump’s tariffs from going into effect, ruling that the president overstepped his authority by imposing across-the-board duties on imports from nations that sell more to the United States than they buy.

The Manhattan-based Court of International Trade said the U.S. Constitution gives Congress exclusive authority to regulate commerce with other countries that is not overridden by the president’s emergency powers to safeguard the U.S. economy.

“The court does not pass upon the wisdom or likely effectiveness of the President’s use of tariffs as leverage. That use is impermissible not because it is unwise or ineffective, but because [federal law] does not allow it,” a three-judge panel said in the decision.

The Trump administration minutes later filed a notice of appeal.

The ruling came in a pair of lawsuits, one filed by the nonpartisan Liberty Justice Center on behalf of five small U.S. businesses that import goods from countries targeted by the duties and the other by 13 U.S. states.

The companies, which range from a New York wine and spirits importer to a Virginia-based maker of educational kits and musical instruments, have said the tariffs will hurt their ability to do business.

The White House and lawyers for groups that sued did not immediately respond to requests for comment.

Stephen Miller, a White House deputy chief of staff and one of Trump’s lead policy advisers, rebuked the court in a brief social media post, writing: “The judicial coup is out of control.”

At least five other legal challenges to the tariffs are pending.

Oregon Attorney General Dan Rayfield, a Democrat whose office is leading the states’ lawsuit, called Trump’s tariffs unlawful, reckless and economically devastating.

“This ruling reaffirms that our laws matter, and that trade decisions can’t be made on the president’s whim,” Rayfield said in a statement.

Trump has claimed broad authority to set tariffs under the International Emergency Economic Powers Act (IEEPA), which is meant to address “unusual and extraordinary” threats during a national emergency.

The law has historically been used to impose sanctions on enemies of the U.S. or freeze their assets. Trump is the first U.S. president to use it to impose tariffs.

The Justice Department has said the lawsuits should be dismissed because the plaintiffs have not been harmed by tariffs that they have not yet paid, and because only Congress, not private businesses, can challenge a national emergency declared by the president under IEEPA.

In imposing the tariffs in early April, Trump called the trade deficit a national emergency that justified his 10% across-the-board tariff on all imports, with higher rates for countries with which the United States has the largest trade deficits, particularly China.

Many of those country-specific tariffs were paused a week later. The Trump administration on May 12 said it was also temporarily reducing the steepest tariffs on China while working on a longer-term trade deal. Both countries agreed to cut tariffs on each other for at least 90 days.

Trump’s on-and-off-again tariffs, which he has said are intended to restore U.S. manufacturing capability, have shocked U.S. financial markets.

The U.S. dollar rose against both the Swiss franc, a traditional currency safe-haven, and the Japanese yen following the court decision.

Source: Reuters

–Agencies