Lululemon eyes key growth market and it's not the U.S.

Over the past 3 decades, Lululemon has gone from a niche yoga-pants statement to a promenade anchor. For astir of that run, U.S. income drove the story.

That's nary longer the case.

The marque that built its sanction connected American fittingness studios and suburban storefronts is present leaning hard connected a marketplace fractional a satellite away. And the latest numbers amusement why.

Why Lululemon's U.S. slowdown matters for investors

Lululemon (LULU) sits successful a tricky spot. Its leggings and jackets outgo a premium, and shoppers lone wage up erstwhile they consciousness bully astir spending.

Right now, galore American shoppers don't.

In the archetypal 4th (ended May 3), full gross roseate 4% to $2.5 billion. But that header fig hides a split.

• North America gross fell 3%.

• In the U.S. specifically, income dropped 4%.

• Comparable income successful the Americas, a measurement that strips retired caller stores, slid 6% connected a constant-dollar basis.

Translation: existing U.S. stores sold little than they did a twelvemonth ago.

Profit took a bigger hit, arsenic Lululemon reported adjusted net of $1.69 per share, down from $2.60 per stock successful the year-ago period.

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Gross borderline fell 410 ground points to 54.2%, chiefly owed to tariffs and markdowns.

Interim Co-CEO Meghan Frank pointed to 2 culprits during the net call.

First, a question of antagonistic media and societal media commentary wounded store traffic. Second, immoderate caller merchandise launches simply didn't land.

"Not each of our merchandise launches person met our expectations," Frank said.

She added that a caller "new look of yoga" run drew involvement but failed to assistance the remainder of the lineup.

Lululemon turns to China for growth

For immoderate bully news, Lululemon looks to China, wherever China Mainland gross jumped 30% successful the quarter, oregon 23% aft adjusting for currency swings. Comparable income determination roseate 13% connected a constant-dollar basis.

A displacement successful the timing of the Chinese New Year added astir 8 percent points to the figure. Even so, the spread with the U.S. is striking.

Put plainly: portion American shoppers pulled back, Chinese shoppers leaned in.

Lululemon's China Mainland conception posted a 42.4% operating borderline past quarter, making it the company’s astir profitable portion by a wide margin.

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For the afloat year, Lululemon expects China to turn astir 20% and expects North America to autumn successful the precocious azygous digits.

The athleisure elephantine is putting its wealth wherever its forecast is.