Lululemon, the renowned athletic apparel retailer, is encountering a slowdown in its largest market, the Americas. In its latest quarterly report, the company revealed flat comparable sales in the region and issued cautious guidance for the current quarter. Despite these challenges, Lululemon exceeded Wall Street’s earnings expectations, narrowly surpassing revenue projections. The company remains optimistic about a stronger second-half performance, as reflected in its fiscal-year guidance.

For the first fiscal quarter, Lululemon reported earnings of $2.54 per share, beating the anticipated $2.38. Revenue was slightly above expectations, reaching $2.21 billion compared to the projected $2.19 billion. In light of the slow growth, the company’s stock surged by 10% in extended trading on Wednesday, boosted by the announcement of a $1 billion addition to its stock buyback program.

Net income for the quarter ending April 28 increased from $290 million last year to $321 million. Sales grew by approximately 10%, from $2 billion to $2.21 billion year-over-year.

CEO Calvin McDonald emphasized the company’s strong momentum in international markets while acknowledging the need for improvements in the Americas to reignite growth. He highlighted efforts to optimize the U.S. product assortment and expressed confidence in the company’s growth potential and the team’s ability to deliver robust results.

In the previous quarter, McDonald cited varying consumer dynamics in the Americas and supply issues related to size and color availability. These challenges persisted into the first fiscal quarter, with limited color options in leggings and insufficient stock of desired sizes. The CEO expects better inventory positioning in the second half of the year.

While Lululemon has seen growth in the Americas, the pace has slowed significantly compared to last year. This year’s first quarter showed a 3% increase in sales in the region, down from a 17% rise during the same period last year. The company’s 6% boost in comparable sales fell short of the 7% expected by analysts.

Lululemon’s guidance for the current quarter reflects the slow growth in the Americas, with expected revenue between $2.40 billion and $2.42 billion, slightly below the anticipated $2.45 billion. Projected earnings per share range from $2.92 to $2.97, below the $3.02 benchmark set by analysts.

Despite recent challenges, Lululemon remains optimistic about the second half of the year. For the full year, the company expects earnings per share to range between $14.27 and $14.47, surpassing analysts’ predictions of $14.11. Expected revenue is between $10.7 billion and $10.8 billion, in line with market expectations.

Lululemon, a leader in the retail sector, has faced some hurdles recently, with its stock dropping 40% year-to-date as of Wednesday’s close. Contributing factors include the departure of Chief Product Officer Sun Choe and investor concerns about growth potential. Additionally, the rising trend in denim poses a potential threat to Lululemon’s sales as consumers shift from athleisure to jeans.