With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

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The athletic-wear brand has been on a tear since 2020; in 2023, it joined the Fortune 500 list of the largest U.S. companies by revenue. (Lululemon is headquartered in Vancouver, BC, but incorporated in the U.S.) The company has benefited both from the pandemic-era work-from-home boom and from a return-to-work culture in which more workplaces are more accepting of casual attire. Analysts see Lululemon’s fast-growing men’s clothing lines and its soaring popularity in China as future growth drivers.

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This year’s Fortune 500 marks the 68th running of the list.

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This year’s Fortune 500 marks the 67th running of the list.

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<p class="p1">Lululemon has weathered countless challenges to its dominance in premium athletic casual wear, a category it invented years ago. It has done so with a steady stream of new products and lots of R&amp;D into fabric development. The retailer this year bought home fitness system Mirror, telegraphing a longer-term move beyond apparel as it looks to continue the fast growth that has seen sales double to $4 billion in the past four years.</p>

Collectively, the ranked companies produced a three-year average shareholder return of 19%, vs. 11% for the S&P 500.

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Shale rules! That’s the lesson of the latest edition of our annual list of public companies with the most stellar three-year profit, revenue, and stock growth. 

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Lululemon Athletica and its subsidiaries design, manufacture, and sell apparel, footwear, and accessories for athletic activities like yoga and running. The company was founded in 1998, and operates more than 750 stores.

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Lululemon athletica (LULU): Company Profile, Stock Price, News, Rankings

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Lululemon athletica

lululemon athletica

Thank you for standing by. This is the conference operator. Welcome to the Lululemon Athletica Inc. Fourth Quarter and Full Year twenty twenty four Financial Results Conference Call. As a reminder, all participants are in a listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Howard Tubin, Vice President, Investor Relations for Lululemon Athletica. Please go ahead.

Thank you and good afternoon. Welcome to Lululemon's fourth quarter earnings call. Joining me to talk about our results are Calvin McDonald, CEO and Meghan Frank, CFO. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward looking statements reflecting management's current forecast of certain aspects of Lululemon's future. These statements are based on current information, which we have assessed, but by which its nature is dynamic and subject to rapid and even abrupt changes.

Actual results may differ materially from those contained in or implied by these forward looking statements due to risks and uncertainties associated with our business, including those we have disclosed in our most recent filings with the SEC, including our annual report on Form 10 K and our quarterly reports on Form 10 Q. Any forward looking statements that we make on this call are based on assumptions as of today, and we expressly disclaim any obligation or undertaking to update or revise any of these statements as a result of new information or future future events. During this call, we will present both GAAP and non GAAP financial measures. A reconciliation of GAAP to non GAAP measures is included in our annual report on Form 10 ks and in today's earnings press release. In addition, the comparable sales metrics given on today's call are on a constant dollar basis.

Press release and accompanying Annual Report on Form 10 K are available under the Investors section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investor site, where you'll find a summary of our key financial and operating statistics for the fourth quarter as well as our quarterly infographic. Today's call is scheduled for one hour, so please limit yourself to one question at a time to give others the opportunity to have their questions addressed. And now, I would like to turn the call over to Calvin.

Thank you, Howard. I'd like to welcome everyone to our fourth quarter call. I'm pleased to be here to discuss our results, which contributed to another year of growth at Lululemon and also speak to our outlook for 2025. On today's call, I'll start with our performance in quarter four, which exceeded the revised guidance we provided in January, and I'll also share some key highlights on our annual performance. Next, I'll provide insights into our product innovation and the strength of our pipeline.

I'll then detail our strategies to raise our brand awareness, which remains a significant opportunity for us globally. Megan will then review our financials and provide our guidance for the first quarter and full year of 2025. Then we'll take your questions. So let's get started. In quarter four, total revenue excluding the 50 third week increased 8% or 9% on a constant currency basis.

Operating margin increased 40 basis points to 28.9% and earnings per share increased 16%. In addition, in quarter four, we repurchased $332,000,000 of stock, which brings our total repurchases in 2024 to $1,600,000,000 which demonstrates our confidence in the long term prospects for Lululemon. Shifting now to our full year 2024 results, total revenue was $10,600,000,000 and excluding week 53 increased by 8% or 9% in constant currency. Adjusted operating margin increased 50 basis points to 23.7% and adjusted earnings per share increased 15%. Since 2021, which is the base year of our current Power of 3x2 five year plan, we have grown revenue at a 19% CAGR, increased adjusted operating margin by 170 basis points and grew adjusted EPS at a CAGR of 23%.

This puts us ahead of our targets for all these key metrics as we enter the fourth year of our plan. I want to thank our teams across the enterprise for their ongoing dedication and commitment to our company. If it wasn't for this global collective, we would not be able to deliver these results. I'd now like to spend a few minutes discussing our product and sharing some highlights from our pipeline of innovation. In quarter four, we were happy with our performance across merchandise categories.

Outerwear and second layers performed well for both women and men, and within accessories, bags continued to be well received. Overall, we were pleased with the guest response to the newness we brought into our core franchises for the holiday season. Looking at quarter one, we have increased our level of newness on par with the past. We believe this increase, along with a robust pipeline of innovation, will enable us to meet the expectations of our guests and I'm excited about what the product teams are bringing to market this spring and throughout the year. We started the year strong with the launch of several new innovations.

Glow Up is our newest technical franchise for women. Made from a new version of our proprietary Ultra Lou fabric, the Glow Up Tite offers a smooth and sculpted fit designed to be used for a variety of training workouts. We also introduced a tank top and intend to expand the line in future seasons. Daydrift is our newest lifestyle trouser for women. Made from our Luxe Dream fabric, this casual pant offers technical features that provide superior comfort and versatility.

Initial response has been very strong and we've been selling out across several sizes and colors. The teams are chasing into it now and we have several additions planned for later this year. Based on this response and performance, we believe Daydrift will become a new core franchise. And finally, there is Be Calm, the latest addition to our yoga assortment and offers incredible softness, a relaxed fit and extreme comfort whether on or off the mat. These are just some of the recent product launches, which have been well received by our guests and demonstrate how we continue to innovate and bring newness into our core activities, while also expanding our casual offerings.

We're pleased with the positive feedback from guests, which is in line with our expectations and consistent with past successful product launches. And we're excited about our product pipeline, and I'd like to share a few examples. Within Shorts, for men, we recently launched a new run franchise called MileMaker and will soon update License to Train to further lean into this franchise opportunity. For women, we'll update Fast and Free with new seasonal styles and colors later this year and will bring innovation into our Swiftly franchise, including a new run short. We'll introduce a new fabric called Lulu Linen, which has the look and feel of linen and also includes some technical performance attributes we are known for.

And we're excited about the plans we have in place to celebrate the tenth anniversary of our iconic Align franchise. We recently introduced the Align Palazzo Pant and will expand further with other new bottoms, including a legging with no front seam. Our guests have been asking for this innovation, and we believe this style, along with all the other newness and innovation we are bringing to market, will help drive new guest acquisition and increase purchase from existing guests as well. As you can see, our teams have been hard at work solving for the unmet needs of our guests, and we feel good about our product pipeline for 2025. Our unique approach to innovation is grounded in creating technical apparel with wide ranging and adaptable use cases.

The strength of our pipeline, along with seasonal updates to our core styles, brings newness into our assortment on a regular basis and helps drive guest loyalty, repeat purchase and long term value. I'm pleased with the styles we've launched so far this spring, and I'm looking forward to the innovations lined up for the remainder of the year. Shifting now to brand awareness, our teams have been delivering on our strategy to activate the Lululemon brand across several of our markets around the world, particularly in The U. S. We continue to focus on increasing our brand awareness, which remains low in nearly every market in which we operate.

For example, our unaided brand awareness in France, Germany and Japan is in single digits. In China Mainland, it's in mid to high teens. In The UK and Australia, it's in the 20s. And in The U. S, unaided brand awareness is in the 30s.

Increasing awareness and consideration is a meaningful opportunity, so so I want to share some of the strategies we have in place to help us achieve this goal, including first, the way we show up in our local communities through brand activations, local events and with our membership program second, how we leverage relationships with our ambassadors and finally, our global brand campaigns. Let's begin with our local community based activations. These events allow us to engage directly with our guests in unique and exciting ways beyond a simple purchase transaction. Our activations are aimed at building loyalty with existing guests and attracting new guests into the brand. We've hit the ground running in 2025.

Our teams have been busy bringing the Lululemon brand to life in several of our markets around the world, particularly in The U. S. Where our opportunity to grow awareness remains February, we partnered with the Rock and Roll half marathon in Las Vegas. We showed up in a big way along the Strip with pre race yoga, cheer stations on the course, co branded product and a takeover of the Sphere. Next, to launch our newest franchise, we opened a Glow Up Studio in SoHo, New York for two weeks across February and March.

In addition to a launch party, we hosted a variety of sweat classes for guests taught by several of our ambassadors, sought after trainers and local fitness instructors. In London, we celebrated our new collaboration with British fashion designer Sol Nash with a launch party during London Fashion Week. We also celebrated the opening of our newly optimized Regent Street store with a Lululemon takeover of the giant video screens and newsstands in Piccadilly Circus. And beginning in mid March and finishing this week, we ran Membership Madness. This event included member only access to in store events, free classes at studio partners and the opportunity to win entry to unique experiences we'll host throughout the year.

This shows how we are innovating and testing premium ways to connect with our 28,000,000 members and provide them with access to compelling and exclusive experiences. In addition to our activations, we continue to explore and strengthen our relationships with our global ambassadors as we start the year. I'm very excited about the new ambassadors we have introduced to start 2025, including PGA golfer Max Homa, professional tennis player Francis Tiafoe and Formula one champion Lewis Hamilton. This elevated roster of ambassadors helps us connect with more guests, both existing and new, in markets across the globe. In quarter one, we showed how we can leverage these relationships in many ways, including activations and expressions of fan support at the Phoenix Open Golf Tournament, Indian Wells Tennis Tournament and Formula one races in both Melbourne and Shanghai.

These are great examples of how we support our athletes as they compete, grow Lululemon's credibility and awareness across our growth activities and allow our local teams to create fun and unique activations for our guests. In addition, these events along with the high level of activations in this period contributed to very strong reach and guest engagement in our own social channels to start quarter one. While our grassroots brand building strategies remain very important to us, we use global campaigns to reinforce our brand positioning and bring new guests into Lululemon. We recently launched our new brand platform, Live Like You Are Alive, with a campaign featuring 78 year old fitness influencer, Joan McDonald. We'll use Live Like You Are Alive as a foundation for our messaging and will bring new creative into the narrative throughout the year.

Upcoming chapters include the celebration of Align's ten year anniversary in quarter two and a Run Focus campaign later in the year. Let me now spend a few moments on our U. S. Business and share my perspective as we head into 2025. As I have shared before, the missed opportunity from last year was the level of newness across our merchandise mix.

The teams worked with our vendors, chased into what was possible and improved the penetration of newness in the second half of twenty twenty four. These efforts contributed to a stabilization in The U. S. Business as the guests responded well to many of the updates we brought into the assortment. I would also note that importantly, our new guest acquisition and retention metrics remain strong and our opportunity is to drive increased revenue per guest as we continue to bring newness and innovation into the mix.

As you have seen, we started this year with several compelling new product launches, but we also believe the dynamic macro environment has contributed to a more cautious consumer. In fact, based on a survey we conducted earlier this month in conjunction with Ipsos, consumers are spending less due to increased concerns about inflation and the economy. This is manifesting itself into slower traffic across the industry in The U. S. In quarter one, which we are experiencing in our business as well.

However, we see guests who visit us responding to the newness and innovations we brought into our assortment. We believe this is a positive indication as we continue to flow new product, engage with our guests through unique and compelling activations and launch brand campaigns. We are controlling what we can control and we expect to see modest growth in U. S. Revenue for the full year of 2025.

Before handing it over to Megan, I'd like to highlight our square footage growth plans for 2025. Stores remain an important part of our growth story. Not only are they highly productive, but they are also hubs in our local communities and allow us to engage directly with our guests, which provides us with another important competitive advantage. In 2025, we plan to grow square footage by approximately 10%, which will be driven by new store openings and our ongoing optimization program. We will continue to open stores in existing markets and enter several new countries this year, including Italy as a new company operated market and Denmark, Belgium, Turkey and The Czech Republic under a franchise model.

In terms of our optimization strategy, a recent and compelling example can be seen in London with the relocation and expansion of our Regent Street store. This store, which now spans 14,000 square feet, offers the largest pant wall and men's assortment in Europe. As a destination for both residents and tourists, our new store offers a pinnacle expression of our brand and we expect it will continue to help us attract new guests into Lululemon from The UK and across Europe. We have much to be excited about in 2025. However, as you are aware, the external environment remains dynamic and there continues to be considerable uncertainty driven by macro and geopolitical circumstances.

That being said, we remain focused on what we can control. We've had a busy start to this year with product launches and event activations, and I feel confident with our plans for the remainder of the year. Meghan, over to you.

Thanks, Calvin. We delivered Q4 results that exceeded our January guidance update as we saw strength across the key components of the P and L, including sales, gross margin and SG and A. These results contributed to another year of solid performance, while acknowledging product opportunities we have discussed in our U. S. Business.

Key highlights in 2024 include revenue growth of 9% excluding the fifty third week and in constant dollars, adjusted operating margin expansion of 50 basis points and adjusted earnings per share growth of 15%. I'm proud we were able to deliver these strong results while continuing to invest in our strategic initiatives, including building brand awareness through our activations and brand campaigns, growing square footage 14% and returning 1,600,000,000 to shareholders through share repurchases. Looking at 2025, we are pleased with both the level and composition of our inventory as we enter the spring season and we are seeing good guest response to newness and innovation we brought into our assortment. However, we also acknowledge the uncertainty in the retail environment as the consumer is navigating a dynamic macro environment. While we expect both top and bottom line growth for the year, we continue to be thoughtful in our planning.

I'll take you through our guidance in a moment, but let me now share the financial details of Q4. For Q4, total net revenue rose 13% or 14% in constant currency to $3,600,000,000 Excluding the fifty third week, net revenue increased 8% or 9% in constant currency and constant dollar comparable sales increased 4%. Within our regions, excluding the fifty third week, results were as follows: America's revenue increased 2% or 3% in constant currency with comparable sales flat. By country, revenue increased 11% in constant currency in Canada and increased 1% in The U. S.

China Mainland revenue increased 38 or 39% in constant currency with comparable sales increasing 27%. And in the Rest of World, revenue grew by 22% or 26% in constant currency with comparable sales increasing by 17%. In our store channel, total sales increased 13% on a constant dollar basis, excluding the fifty third week, and we ended the quarter with seven sixty seven stores globally. Square footage increased 14% versus last year, driven by the addition of 56 net new Lululemon stores since Q4 of twenty twenty three. During the quarter, we opened 18 net new stores and completed 16 optimizations.

In our digital channel, revenue increased 84% excluding the fifty third week and contributed $1,800,000,000 of top line or 50% of total revenue. And by category excluding the fifty third week, men's revenue increased 12% versus last year, while women's increased 6% and accessories and other grew 9%. Gross profit for the fourth quarter was $2,200,000,000 or 60.4% of net revenue compared to gross margin of 59.4% in Q4 twenty twenty three. The gross profit rate in Q4 increased 100 basis points ahead of our guidance and was driven primarily by the following: a 160 basis point increase in product margin driven predominantly by lower product costs, lower markdowns and improved shrink, offset somewhat by higher airfreight 30 basis points negative impact from foreign exchange and 30 basis points of net deleverage on fixed costs. Relative to our guidance, which was for a gross margin increase of approximately 30 basis points, The upside was driven predominantly by leverage associated with higher top line, prudent management of fixed expenses within gross margin and foreign exchange.

Moving to SG and A. Our approach continues to be grounded in prudently managing our expenses, while also continuing to strategically invest in our long term growth opportunities. SG and A expenses were approximately $1,100,000,000 or 31.5% of net revenue compared to 30.9% of net revenue for the same period last year. SG and A was better than our guidance of 80 to 90 basis points of leverage due to higher top line and foreign exchange. Operating income for the quarter was approximately $1,000,000,000 or 28.9% of net revenue compared to operating margin of 20 Tax expense for the quarter was $3.00 $9,000,000 or 29.2% of pre tax earnings compared to an effective tax rate of 28.1% a year ago.

The increase in tax rate relative to last year is due to a decrease in tax benefits related to stock based compensation, an increase in non deductible expenses and an increase in profits outside of The U. S. Net income for the quarter was $748,000,000 or $6.14 per diluted share compared to EPS of $5.29 for the fourth quarter of twenty twenty three. Capital expenditures were $235,000,000 for the quarter compared to $2.00 $7,000,000 for the fourth quarter last year. Q4 spend relates primarily to investments that support business growth, including our multi year distribution center project, store capital for new locations, relocations and renovations and technology investments.

Turning to our balance sheet highlights. We ended the quarter with approximately $2,000,000,000 in cash and cash equivalents. Inventory increased 9%, slightly lower than our guidance for an increase in the low double digits. We repurchased 938,000 shares in Q4 at an average price of $354 For the full year, we repurchased approximately 1,600,000,000 of stock. Share repurchases remain our preferred method to return cash to shareholders and we currently have approximately $1,300,000,000 remaining on our repurchase program.

Let me now share our detailed guidance outlook for full year 2025. We expect revenue to be in the range of $11,150,000,000 to $11,300,000,000 This range represents growth of 5% to 7% relative to 2024. Excluding the fifty third week that we had in the fourth quarter of last year, we expect revenue to grow 7% to 8%. And as Calvin said, we expect revenue growth in The U. S.

To be modestly positive for the year. I'd also note that we expect foreign exchange to have a negative one percentage point impact on our revenue growth rate for the year. We expect to open 40 to 45 net new company operated stores in 2025 and complete approximately 40 optimizations. We expect overall square footage growth of approximately 10%. Our new store openings in 2025 will include approximately 10 to 15 stores in The Americas with the rest of our openings planned in our international markets, the majority of which will be in China.

For the full year, we expect gross margins to decrease the For the full year, we expect markdowns to be relatively in line with 2024. Turning to SG and A for the full year, we expect deleverage of approximately 40 to 50 basis points versus 2024, driven by ongoing investments into our Power of 3x2 roadmap and FX headwinds. For the full year, we are planning investments in marketing and brand building aimed at increasing our awareness and acquiring new gas, investments to support our international growth and market expansion and continued investment in technology and data analytics capabilities. When looking at operating margin for the full year 2025, we expect a decrease of approximately 100 basis points versus 2024. But we remain thoughtful as we plan expenses, we also continue to invest in our strategic roadmap to enable future growth.

As I mentioned, we are seeing headwinds from foreign exchange and tariffs, while also absorbing some additional costs relative expenses including store labor hours, travel and incentive comp. I would note that between 2021 and 2024, our operating margin increased 170 basis points, which is greater than our prior three times two target of modest operating margin expansion annually. For the full year 2025, we expect our effective tax rate to be approximately 30%. For the fiscal year 2025, we expect diluted earnings per share in the range of $14.95 to $15.15 versus EPS of $14.64 in 2024. Our EPS guidance excludes the impact of any future share repurchases, but does include the impact of our repurchases year to date.

I would also note that FX pressure relative to last year is a $0.3 to $0.35 drag on EPS in 2025. When looking at inventory, we expect dollar inventory to increase in the high teens in Q1 as we anniversary last year's declines. We expect capital expenditures to be approximately $740,000,000 to $760,000,000 in 2025. This spend relates to investments to support business growth, including a continuation of our multi year distribution center project, store capital for new locations, relocations and renovations and technology investments. Shifting now to Q1.

We expect revenue in the range of $2,335,000,000 to $2,355,000,000 representing growth of 6% to 7%. The growth rate in Q1 is being negatively impacted by one percentage point related to foreign exchange. We expect to open three net new company operated stores in Q1. We expect gross margin in Q1 to be approximately flat with Q1 twenty twenty four. We expect a modest improvement in product margin, offset primarily by deleverage on fixed costs.

Markdowns are planned to be relatively flat with last year. In Q1, we expect our SG and A rate to deleverage by approximately 120 basis points relative to Q1 twenty twenty four. This will be driven predominantly by increased foundational investments and related depreciation and also strategic investments including those to build brand awareness to support future growth. When looking at operating margin for Q1, we expect deleverage of approximately 120 basis points. Turning to EPS.

We expect earnings per share in the first quarter to be in the range of $2.53 to $2.58 versus EPS of $2.54 a year ago. Our EPS guidance for the quarter includes approximately $0.06 of incremental negative impact from foreign exchange. We expect our effective tax rate in Q1 to be approximately 30%. And with that, I will turn it back over to Calvin.

Thank you for your time today. I am pleased with how we closed out 2024, delivering results that demonstrate our leadership, agility and potential for growth. And I am proud of how we have started the year with new product innovations, collaborations and a steady drumbeat of brand and community activations around the world. This energy will propel us forward as we navigate the current economic and political uncertainty, especially in The U. S.

We will control what we can control and we will focus on continuing to deliver the high level of newness and product innovations our guest expects from Lululemon. I continue to feel confident in our Power of 3x2 strategy and our people who will continue to excite and engage with our guests and drive us forward in 2025 and beyond. We'll now take your questions. Operator?

Thank you. We'll now begin the question and answer session. Our first question is from Alex Stratton with Morgan Stanley. Please go ahead.

Perfect. Thanks so much and congrats on a great quarter. I just wanted to focus, Calvin, on the modest U. S. Revenue growth you're expecting for the year.

Can you just elaborate a little bit around how you define modest and should that be consistent throughout the year or any difference in cadence by quarter? And then just how you really arrive at that as the right level from here? Thanks a lot.

Thanks, Alex. I'll take the first and then I'll pass it over to Megan to go specifically into breaking down the growth number for you. But as I sort of shared in Q4, consistent with what we saw throughout the year, our guests responded well to the newness that we offered through our assortment and our business continued to sequentially get stronger on the back of that newness. And as we transitioned into Q1, our newness is back to being on par where it's been in the past as we indicated we would be and the guest has responded very well to a number of new product launches that I'm excited about can continue to build into future franchises from Glow Up, Daydrift, Be Calm, Shake It Out, as well as what lies ahead in our pipeline, which is very strong. And I shared just a few of those with you with the tenth year anniversary for a line coming up, building on the Palazzo Pant that she's responded incredibly well to, as well as offering a no front seam legging, which we know our guests have been asking and to offer that within the Align franchise as an opportunity to celebrate the tenth anniversary.

We're excited about that as a means for our high value guests as well as new guests to acquire and bring in. That being said, we are operating within a dynamic macro environment that's really contributed to a cautious consumer, where we've seen material impact to traffic across the industry. While we've experienced some of these traffic trends, the guest who is visiting has responded very well to our newness in innovation. When we look at UPT average order size, both of these are positive. So the guests coming in are responding to the newness, they're buying more, and it's having an impact.

So those are very good indicators. And as we continue to flow the positive newness that we see throughout the year, as well as the activations, I want to touch on North America, in particular in The U. S, we've started the year with a fantastic rhythm and cadence of very unique community based activations. So overall, there's a very good energy across the teams in the business, and the guests are responding very well to product, and we're controlling and focused on what we can control. And I think we're well positioned as these macro challenges soften moving forward.

But I'll allow Megan to just sort of put a little bit of color to the numbers as well.

Great. Hi, Alex. So in terms of The U. S, we are offering color on North America growing in the low single digit to mid single digit range for the full year, The U. S.

On the lower end of that and Canada higher. We're not breaking down the quarters, but what I would share is in terms of Q1, it's not trending materially differently than Q4. As Calvin mentioned, we did come into the quarter and saw a decline in traffic, macro traffic, that's impacting us as well. And we're also seeing some really positive performance in terms of newness, which we believe positions us well as that traffic environment improves. I would also note that the decline was more pronounced last year in The U.

S. In Q2. So we're up against our largest growth rate in '24 in Q1.

The next question is from Brooke Roach with Goldman Sachs. Please go ahead.

Good afternoon and thank you for taking my question. Calvin, I was hoping you could elaborate on your marketing strategy from here. Are you seeing the response that you're hoping to get as you build into some of these additional customer acquisition vehicles such as Membership Madness Week? And then can you speak to what that's driving in terms of consumer acquisition and retention specifically in The U. S?

Thanks, Brooke. Overall, how we've started this year in the energy and really focusing in on and activating larger activations community based events, I'm very encouraged with the results that we're seeing. Lot of those are geared to both acquire new guests as well as drive loyalty and help in our retention and love for the brand with our high value guests. Across all of the ones that we've started and I shared a few of those. The fund activations celebrating our ambassadors, be it where they compete around the world in Melbourne, in the Waste Management Gulf, Indian Wells as a means to activate and then some of the other activations we've done ourselves into the integrated marketing on the back of Go Up and the Go Up Studio in New York.

We had thousands of guests register for Membership Madness. We have over 15,000 guests that have signed up for community based sweat activations with our partners around North America heavily in The U. S. We have waiting lists of over 1,000 for some of these activations in our communities. These are incredibly strong, rich engagement numbers and we see through those equally a number of new guests.

And that to me is one of the very unique aspects of our brand when I talk about our moat and what makes us unique. The ability to activate a campaign, integrate it across our community, our ambassadors and bring to life is something we definitely see great value in, plan to do even more of this year than last year. And I think you're just getting a flavor for what that looks like if you think of the first eight weeks of this year to start and the pace of those activations. And as I said, the engagement has been very strong. And then obviously socially as well, both earned media as well as the halo we get from those and that bleeds to getting into that I Needed Brand awareness.

So you're going to see more of that. We think it's a unique approach and we do it very strongly across our communities and allows for our stores, our ambassadors to be involved. It's unique and it's having an impact on both retention and acquisition. So I'm very pleased with how we've started this year. I think the energy and the cadence is very strong, stronger than we've done in I think a number of years and really feels that we're on the offense in this market and guests are responding well and the newness they're responding well to.

And as Meagan said, we're focused on what we control and set up well for the rest of the year as the macro challenges soften and if they do.

Great. And then for Meghan, can you elaborate on the plans that you have embedded in your guidance for tariffs this year? If tariffs were to widen to a broader set of geographies, what are your mitigation strategies right now? And what is the quantification of the current tariff impact under what you're seeing today?

Yes, absolutely. So in terms of tariffs, we've got approximately 20 basis points of a headwind embedded in our guidance, which is reflective of current actions on China and Mexico imports. Closely monitoring the environment, we'll continue to look across our cost structure as well as to pricing should the environment change. So definitely keeping a close eye on that.

Thanks so much. The next question is from Dana Telsey with the Telsey Group. Please go ahead.

Hi. Calvin, as you think about the effectiveness of the marketing and what you're seeing globally, I saw the new store in Tokyo, obviously London also.

How are you planning for international go forward and how do you think of the activations there? And then Megan, on the margins, the cadence of margins as we go through 2025, are there any puts and takes of what we should be mindful of? And just lastly, for the first quarter sales growth guidance, are you currently within those rates now? Thank you.

Thanks, Dan. I'll take the first part. The activations that I've referred to in The U. S. Is absolutely our go to strategy go to market strategy around the globe.

And we customize it based on the maturity of the market, obviously The U. S. We have an opportunity to amplify deeper with bigger activations in communities in newer markets. We leverage and tap into the store base more and then build the momentum and the size and activate. But the general formula of leveraging local market community stores, educators, ambassadors, And there are a number, as you know, around the globe from Sweat Games in Mainland China to what we did with World Mental Health Day in many markets that were shared, how we're activating around these global competitive events that our ambassadors compete in.

We just did a few Formula one races in both Shanghai and Australia with Lewis Hamilton being one of our latest ambassadors, plan to do that across a lot of our activities. So that is absolutely one of our unique go to market strategies that I think we do better than most. And stores play a big part of that and how we activate those. And we're early in our optimization strategies and plans. If you look back over the last year, but even just last few quarters, we've optimized a store in Melbourne, Eleven Thousand square feet, and it's performing incredibly well.

You mentioned the store in Tokyo. We have exciting plans planned for Tokyo. See Japan is a big growth market for us. We have an exciting plan and opportunity in South Korea and Regent Street that just opened that's performing very well with an incredible activation both on the back of Sol Nash and Fashion Week as well as the activations the store teams did. So that is a big part of how we go activate.

You're going to see more of that as well as these optimizations that continue to perform well and both acquire local guests as well as welcome a global tourist guest into the brand that we acquire as well as as they travel wanting to come in and see the brand and the product. So excited about the momentum in both internationally as well as in North America.

Great. And I'll take the margin piece. So in terms of op margin, we are guiding to 100 basis point decline for the year. At the highest level, I just call out FX and tariff headwinds are a little bit over 50% of that decline in op margin. And then we've got some investments in the business to add back some of the expense areas we pulled out in 2024.

So I would view those three buckets as incremental headwinds unique to this year. And then we also are continuing to invest into our power of 3x2 roadmap with our confidence on the long term. And in terms of quarters, we've got a little bit more pressure as we called out in terms of Q1. It's also related to Q1 being our highest revenue growth rate in 2024. So we've got 120 basis points decline in op margin there.

Pretty similar story in terms of SG and A, so 120 basis points deleverage in Q1 and then 40 basis points to 50 basis points for the year. So I think that's the color I'd offer there. And then you also had a question, Dana, on quarter to date trend. We're not breaking out specifics on quarter to date trend, but I would share we're about 50% through the quarter. And looking at current trend of business and mindful of the environment, we did guide to 6% to 7% growth for the quarter with one point also of an FX headwind embedded in that.

Thank you. As a reminder, analysts are kindly asked to limit themselves to a single question, then rejoin the queue if they have more. The next question is from Lorraine Hutchinson with Bank of America. Please go ahead.

Good afternoon. Have you included any improvement from the choppy first quarter traffic performance in North America and the full year guidance? And are there ways to be more aggressive on some of these marketing activations to drive stronger traffic as we move through the year?

Hi, Lorraine. I would say our balance of year outlook reflects similar trends to Q1 at this point in time. I'll let Calvin chime in on marketing.

Yes. And I think the we're always testing and learning and looking for ways to continue to invest within the parameters of our guidance to add to marketing. And I think I'm very pleased with the current response from our guests, excited about the campaigns coming. As I mentioned, the Align tenth year anniversary will be a large activation around the globe, supported with a lot of product new product and ways that I think will engage both with new guests as well as our high value guests and reasons to update their Align wardrobe. So we always look for ways to keep leaning in and investing.

And as I mentioned, the cadence and rhythm to start this year has been definitely on the offense and I'm pleased with the results and those results around the globe. And we're going to continue to be on offense and support the product and the pipeline of newness that's coming and with our guests.

The next question is from Matthew Boss with JPMorgan. Please go ahead.

Great. Thanks. So Calvin, could you elaborate on sales metrics in The U. S. As you've introduced recent newness?

Just your confidence in this year's product pipeline with first quarter to date sales trends unchanged relative to the fourth quarter despite the softening macro that I know you cited? And then, Meghan, just your comfort with content and composition of inventory today and what have you embedded for markdowns in the gross margin guide?

Hey, Matt. So in terms of sales in The U. S, so we did come into the quarter and saw a negative traffic trend industry wide, which is impacting us. Similar conversion, I'd say, to what we experienced in Q4, and then we've seen an improvement in AOV and specifically UPTs, really a reaction to the newness in our assortment, and again feel that positions us well for when traffic rebounds. So Q1 trends for The U.

S. Not materially different than Q4. And then in terms of inventory, I'm pleased with the level and composition of the inventory. We offered some color on high teens growth and it's really related to just the cadence of our inventory as we move through this year, being in a good in stock position in core, bringing in newness, and we also are expecting flat markdowns for both Q1 and the full year at this point in time.

And next question is from Janine Stitcher with BTIG. Please go ahead.

Hi. Thanks for taking my question. Question is for Megan. I was hoping you could just elaborate a bit on your SG and A philosophy. With the guidance you gave for deleverage of 40 to 50 basis points this year, if we see better sales, would we expect it to still be in that range or would you put more into SG and A?

Or on the flip side, if we have sales come in weaker, maybe just elaborate on some of the areas where you might have some flex? Thank you.

Yes. Thank you. So as I mentioned, we do have a headwind in FX for the year. And in terms of how that impacts SG and A, it's about half of the 40 basis point FX headwind, so 20 basis points impacting SG and A. And then also, as I mentioned, we are still investing behind our Power three times two roadmap.

So continuing to support our international strategy, our store expansion strategy across the globe, marketing and brand, as Calvin mentioned, and going after that un native brand awareness piece. And then another one I'd mentioned was just tech in terms of foundational investments in data analytics. I think it will depend on the environment and the business dynamics in terms of where SG and A moves with either increasing or decreasing sales. We always have contingencies across the business, both on the upside and downside and will depend on the momentum we're seeing in the business and the current environment in terms of how we approach that.

Great. Thanks so much. The next question is from Amisha Sherman with Bernstein. Please go ahead.

Thank you so much. So Megan, talking about The Americas versus international growth, you talked about a kind of low to mid single digit outlook for The Americas. That would put international growth quite a bit lower than what you did in 2024. Can you give some color around where you may be seeing a slowdown internationally? Are there particular markets?

And what gives you what your assumption is coming from? And then a quick follow-up on your levels of investments. You talked about foundational investments, strategic investments, marketing. Can you talk about how flexible the cost base is to the downside in the event of a tougher macro scenario? What would margin progression look like?

Yes. So in terms of revenue by geography, as I said, we're offering color on Americas low single digit to mid single digit for the year and China Twenty Five Percent to 30%, rest of world approximately 20%. So we're being thoughtful in our planning, looking at current trends of the business and the forward outlook in terms of the environment. So a little bit below what's embedded in our five year CAGR, but we remain ahead of schedule and really pleased and committed to that long term target there. And then in terms of flex across the P and L, as I just mentioned, we do have a number of contingency levers dependent on business outlook.

Lululemon athletica (LULU) Q4 2025 Earnings Call Transcript

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