Morning Note: Market News and Lululemon
MARKET NEWS
US Markets: The S&P 500 closed 6000.36 +61.06 (+1.03%) on Friday after the US payrolls report showed a gain of 139k for May. Asian stocks rose as US and European equity futures slipped. The yen strengthened after GDP shrank less than expected. Citi strategists raised their year-end S&P 500 target to 6,300.
Los Angeles Riots: Demonstrations over US immigration raids escalated for a third day in Los Angeles. Donald Trump deployed 2,000 National Guard troops yesterday despite Governor Gavin Newsom’s objections.
Economic Data: China’s export growth slowed to 4.8% in May, missing estimates, as a 34.4% plunge in shipments to the US added to the urgency for Beijing to reach a trade deal. Talks between the two sides kick off in London today. China’s CPI fell 0.1% in May from a year earlier, versus a forecast of minus 0.2%. Factory deflation persisted, with PPI recording a faster drop of 3.3% compared with April. Japan’s economy shrank at an annualized pace of 0.2% in the first quarter, less than the 0.7% retreat estimated in preliminary data, revised figures showed.
Meta is in talks to invest in startup Scale AI, people familiar said. The financing may exceed $10 billion, making it one of the largest-ever private company funding deals.
AI: An eyeball-scanning startup co-founded by Sam Altman is bringing its novel ID services to the UK starting this week. Keir Starmer will appear alongside Nvidia’s Jensen Huang today to put tech and AI at the heart of his plan to boost economic growth.
Corporate: BYD’s price cuts have unleashed a reckoning for China’s EV industry that has alarmed Beijing. Apple’s Worldwide Developers Conference gets underway, with a focus on a new software design that sets the stage for upcoming iPhones.
Lululemon – First Quarter Results
On June 5, 2025, Lululemon released its results for the first quarter of its financial year ending February 2026, delivering earnings and revenue slightly above expectations. However, the company lowered its full-year profit guidance due to tariff-related costs and softer demand in key markets, leading to a sharp decline in its share price during after-hours trading and in Friday’s session.
Lululemon is a global athletic apparel company known for its performance and lifestyle products, including yoga, training, and running gear, as well as accessories and footwear. The company continues to develop its digital fitness offerings through app-based services and in-home connected hardware.
In the quarter ended May 4, 2025, revenue increased by 7% year-over-year to $2.37 billion, slightly surpassing analyst expectations of $2.36 billion. Comparable sales rose by 1%, below the anticipated 4.1%. Regionally, same-store sales in the Americas declined by 2%, while international markets saw a 6% increase, driven by growth in China. Earnings per share were $2.60, modestly above the $2.58 expected by analysts.
The company reported a 23% increase in inventories to $1.7 billion, raising concerns about demand and inventory management.
For the second quarter, Lululemon projects earnings between $2.85 and $2.90 per share, with revenue estimates ranging from $2.535 billion to $2.56 billion, both figures below consensus estimates. The company also revised its full-year earnings forecast to a range of $14.58 to $14.78 per share, down from the previous guidance of $14.95 to $15.15.
CEO Calvin McDonald attributed the cautious consumer spending in the U.S. to economic uncertainty and inflationary pressures. The company plans to implement modest price increases on select products and enhance cost-cutting measures to mitigate the impact of tariffs and changing consumer behaviour.
Analysts expressed concerns over the company's performance, with some highlighting the lack of significant traction from new product lines and increased competition from more affordable and trendier brands. The stock's decline reflects investor apprehension about Lululemon's ability to navigate these challenges in the current economic climate.