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Athleisure maker Lululemon Athletica reported slowing traffic in its hundreds of US stores as worries over the economy prompt consumers to take a more cautious look at its $100 yoga pants.
The Canadian company reported record revenue of $10.6bn for 2024, a rise of 10 per cent year on year, as new stores opened and sales at existing stores grew overall. Annual net income grew by 17 per cent to $1.8bn, also a new high.
But the figures also revealed weakness in its biggest market of the US, whose 374 stores sell high-end Lululemon workout gear — and where consumer sentiment has been shaken by persistently high inflation and President Donald Trump’s tariffs on trading partners.
Same-store sales in the Americas division were unchanged in the fourth quarter of 2024 and decreased by 1 per cent for the full year. Traffic to US stores has been declining in the company’s first quarter, which began in early February, executives said.
“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,” Calvin McDonald, chief executive, told analysts. Citing a survey Lululemon conducted earlier this month, he added that “consumers are spending less due to increased concerns about inflation and the economy”.
Shares of Lululemon fell by 10 per cent in after-hours trading in New York.
A series of economic data releases, surveys and corporate announcements have pointed to consumer retrenchment as Trump unleashes tariffs on an array of imports and countries.
A US consumer expectations index published by the Conference Board think-tank this week fell to the lowest level in a dozen years and one that usually signals a recession. Nike, the shoe and athletic apparel company that is a competitor of Lululemon, last week forecast an unexpected drop in quarterly revenue.
Lululemon chief financial officer Meghan Frank told analysts its gross profit margin was likely to decline by 0.6 percentage points this year compared with 2024, in part due to “the impact of increased tariffs related to China and Mexico”. Both countries have Lululemon stores and are subject to new US tariffs.
In a regulatory filing, Lululemon said most of its products were manufactured in Vietnam, Cambodia, Sri Lanka, Indonesia and Bangladesh.
If the tariffs expand — as Trump aims to do next week — “we’ll continue to look across our cost structure as well as to pricing, should the environment change”, Frank said.
