Lululemon Athletica Inc. reported its first-quarter fiscal 2025 earnings with revenues of $2.3 billion, reflecting a 7% increase year-over-year. Gross profit rose 8% to $1.4 billion, with a gross margin improvement of 62 basis points to 58%. However, operating earnings before interest and taxes (EBIT) grew only 1% to $439 million, with an operating margin decline of 108 basis points to 19%. Net income decreased 2% to $315 million, and net income margin contracted by 128 basis points to 13%. Operating cash flow matched net income at $315 million, down 2%, while free cash flow fell 15% to $162 million, with a margin decrease of 179 basis points to 7%. The company experienced a sharp deceleration in international comparable sales growth, with Greater China sales rising 8% compared to 27% previously, and the rest of the world up 7% versus 17% earlier. In the U.S., comparable sales increased by only 1%, indicating some core products did not resonate with consumers. Management revised its full-year gross margin guidance downward, now expecting a decline of approximately 110 basis points compared to 2024, an increase from the prior forecast of a 60 basis point decrease. This additional margin pressure is primarily attributed to increased tariffs. The tariff impact, along with ongoing investments, is expected to reduce operating margins by about 160 basis points. Following the earnings release, Lululemon's shares fell 20%, reflecting investor concerns over tariffs, weaker consumer demand, and heightened competition. Meanwhile, Lululemon's 30-day option implied volatility stands at 35, within its 52-week range of 26 to 76.