Lululemon Reports Record Revenue but Warns of Margin Pressure Ahead

Lululemon Athletica reported record quarterly revenue of $2.8 billion Thursday, beating analyst expectations by $140 million, but shares fell four percent in after-hours trading as management issued a cautious outlook for the next two quarters.

CEO Calvin McDonald cited higher raw material costs, particularly for technical fabrics, and a "normalization" of consumer spending in the US market as factors that would likely compress gross margins by 150 to 200 basis points.

International growth remained a bright spot. Revenue from China surged 39 percent, Europe grew 28 percent, and the company's new Rest of World segment — covering Australia, South Korea, and Japan — posted its first profitable quarter.

"We remain confident in the long-term opportunity," McDonald told analysts on a conference call. "The brand is as strong as it has ever been globally. What we're managing is a US cycle, not a brand problem."

Lululemon employs approximately 4,500 people at its Vancouver headquarters and remains one of BC's most valuable publicly traded companies, with a market capitalization of approximately $42 billion.