Lululemon (LULU, Financials) shares dropped 23% in after-hours trading Thursday after the company lowered its full-year earnings forecast despite posting a modest beat for the fiscal first quarter. The company cited a dynamic macroenvironment, slower U.S. sales, and tariff-related pressures as key factors behind the cautious outlook.

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Earnings per share for the quarter ended May 4 came in at $2.60, slightly above the $2.58 expected by analysts. Revenue rose 7% year over year to $2.37 billion, edging past expectations of $2.36 billion. Net income dipped to $314 million from $321 million a year earlier.

CEO Calvin McDonald said U.S. consumers are becoming more selective in their spending, while CFO Meghan Frank announced strategic price hikes on select items beginning in the second half of the current quarter to offset increased import tariffs. Frank said full-year gross margins are now expected to decline by 110 basis points nearly double the drop previously forecast due largely to tariff costs.

Comparable sales grew just 1% overall, missing the 3% StreetAccount consensus, with a 2% drop in the Americas offset by 6% international growth. Second-quarter earnings are expected in the range of $2.85$2.90, well below the $3.29 consensus estimate. The company maintained its full-year revenue forecast of $11.15 billion to $11.3 billion.

As of Thursday's close, LULU stock was down 13% year-to-date. Tariff concerns have also weighed on peers, including Gap's Athleta and Nike, which have acknowledged pricing impacts and supply chain exposure in recent updates.

This article first appeared on GuruFocus.