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lululemon Surpasses Revenues & Earnings in Q3, Lifts FY25 View
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Key Takeaways
LULU beat Q3 revenue and EPS estimates, with 7.1% y/y sales growth and stronger international momentum.
Margins contracted on higher markdowns, tariff impacts and increased SG&A expenses in the quarter.
LULU raised its FY25 revenue and EPS outlook, supported by continued strength in Mainland China.
lululemon athletica inc. (LULU - Free Report) reported third-quarter fiscal 2025 results, wherein revenues and earnings per share (EPS) beat the Zacks Consensus Estimate. The company’s top line improved year over year, driven by gains in the international business. Meanwhile, the bottom line declined year over year, owing to soft margins, which were impacted by higher markdowns, tariff impacts and elevated SG&A expenses.
lululemon’s fiscal third-quarter earnings per share (EPS) of $2.59 declined 9.8% from $2.87 in the prior-year quarter. However, the bottom line surpassed the Zacks Consensus Estimate of $2.22.
The Vancouver, Canada-based company’s quarterly revenues rose 7.1% year over year and on a constant-dollar basis to $2.57 billion and beat the Zacks Consensus Estimate of $2.48 billion. On both the reported and constant-dollar basis, net revenues declined 2% in the Americas and increased 33% internationally.
Total comparable sales (comps) rose 1% year over year and improved 2% on a constant-dollar basis. Comps in the Americas declined 5% on both the reported and constant-dollar basis. Internationally, comps increased 18% on both the reported and constant-dollar basis. Our model predicted a comps decline of 2.6% for the fiscal third quarter.
The Zacks Rank #3 (Hold) company has rallied 16.9% in the past three months against the Textile - Apparel industry’s 1.9% decline.
Image Source: Zacks Investment Research
LULU’s Q3 Earnings Overview
Within the Americas segment, revenues declined 1% year over year in Canada (flat in constant currency), and 3% in the United States, on both the reported and constant-dollar basis. In the International segment, revenues rose 46% in Mainland China (47% in constant currency) and 19% in the Rest of the World, on both the reported and constant-dollar basis. Comps improved 24% in Mainland China (25% in constant currency) and 9% in the Rest of the World, on both the reported and constant-dollar basis, in the fiscal third quarter.
In the store channel, the company’s total sales were flat year over year, on a constant-dollar basis. Digital revenues improved 13% year over year, contributing $1.1 billion, or 42%, to the total revenues.
The gross profit improved 2% year over year to $1.43 billion. The gross margin contracted 290 basis points (bps) to 55.6%, primarily affected by a 290-basis-point (bps) decline in the product margin, led by increased markdowns and tariff impacts. Notably, markdowns increased 90 bps, while currency headwinds had a 10-bps negative impact. These headwinds were partly offset by a 10-bps benefit from other smaller items in the gross margin. We expected the gross margin to contract 410 bps year over year to 54.4% for the fiscal third quarter.
However, management noted that the gross margin outperformed its guidance of a 410-bps decline, fueled by a stronger-than-expected top line, a lighter net tariff impact and disciplined control of fixed costs within the gross margin.
lululemon athletica inc. Price, Consensus and EPS Surprise
SG&A expenses of $988.3 million increased 8.6% from the year-ago quarter. SG&A expenses, as a percentage of net revenues, of 38.5% rose 50 bps from 38% in the prior-year quarter. The increase in SG&A expense rate was favorable versus the company’s guidance of a 150-bps increase. The better-than-expected SG&A rate was driven by prudent expense management.
Our model predicted SG&A expenses to rise 8.3% year over year for the fiscal third quarter, with a 150-bps increase in the SG&A expense rate to 39.5%.
The operating income declined 11% year over year to $435.9 million in the fiscal third quarter. The operating margin of 17% contracted 350 bps year over year. Our model predicted a 24.4% year-over-year decline in adjusted operating income to $371.1 million. We estimated the operating margin to decline 560 bps year over year to 14.9%.
Snapshot of lululemon’s Store Plans
In third-quarter fiscal 2025, LULU opened 12 net new stores, including 14 store openings and two closures. As of Feb. 1, 2026, it operated 796 stores.
In the fourth quarter of fiscal 2025, the company expects to open 17 net new company-operated stores and complete eight store optimizations. For fiscal 2025, lululemon expects 46 net new company-operated stores, which is above the prior view of 40-45 net new store openings. It expects to complete 36 co-located optimizations compared with 35 optimizations mentioned earlier.
LULU expects overall square footage growth in the low-double digits for fiscal 2025. Store openings in fiscal 2025 are expected to include 15 stores in the Americas, including about nine locations in Mexico. The rest of the store openings in fiscal 2025 are expected to occur in the international markets, primarily in China.
LULU’s Other Financial Details
lululemon exited third-quarter fiscal 2025 with cash and cash equivalents of $1 billion and no debt. The company had $593 million of capacity under its committed revolving credit facility and stockholders’ equity of $4.5 billion. At the end of the third quarter of fiscal 2025, the company’s inventories rose 11% year over year to $2 billion, with inventory units improving 4%. The capital expenditure was $167 million in the fiscal third quarter.
In the fiscal third quarter, lululemon repurchased 1 million shares for $189 million, at an average price of $181. As of Dec. 3, 2025, LULU approved a $1-billion increase to its share repurchase program. Including the new approval, the company had $1.6 billion remaining under its share repurchase authorization as of Dec. 11, 2025.
For the fiscal fourth quarter, the company anticipates dollar inventory to increase in the high-teens and inventory per unit to increase in the high-single-digits, driven by higher tariffs and adverse currency rates.
lululemon’s Targets for Q4 & FY25
LULU raised its revenue and EPS guidance for fiscal 2025. LULU anticipates net revenues of $10.96-$11.05 billion for fiscal 2025 compared with the $10.85-$11 billion stated earlier. This indicates 4% year-over-year growth versus the previously mentioned rally of 2-4%. Excluding the 53rd week in 2024, revenues are expected to rise 5-6% compared with 4-6% growth mentioned earlier.
On a segmental basis, the company expects Americas revenues to be flat to down 1%, reflecting a 1% decline in the United States and nearly stable performance in Canada. Internationally, management projects Mainland China revenues to be at or above the high-end of its guidance of 20-25% increase, while revenues for the Rest of the World are expected to increase in the high-teens.
In Mainland China, the company’s fiscal third-quarter results were strong and exceeded expectations. However, management noted that the two calendar shifts, including the earlier start of the 11/11 events, which aided the fiscal third quarter, and a later Chinese New Year compared with last year, will weigh on the fiscal fourth-quarter performance. As a result, management expects fiscal fourth-quarter revenue growth to be below the fiscal third-quarter pace.
lululemon expects a 270-bps year-over-year decline in the gross margin compared with the previously mentioned 300-bps fall. The variance from the prior guidance is mainly due to the lower estimated tariff impacts. Additionally, the company anticipated markdowns of 70 bps compared with the prior stated 50 bps.
The SG&A expense rate is expected to rise 120 bps year over year for fiscal 2025, above the prior mentioned 80-90 bps. While the company continues to manage expenses prudently, it is stepping up marketing investments in the fiscal fourth quarter to drive traffic and strengthen brand awareness.
LULU expects the fiscal 2025 operating margin to contract 390 bps year over year. The company projects an EPS of $12.92-$13.02, suggesting an increase from the $14.64 reported in fiscal 2024. The revised EPS view marks an increase from $12.77-$12.97 projected earlier. The company anticipates an effective tax rate of 30% for fiscal 2025. lululemon expects capital expenditure to be near the low-end of the prior view of $700-$720 million for fiscal 2025.
For the fourth quarter of fiscal 2025, management anticipates net revenues of $3.5-$3.59 billion, indicating a 1-3% year-over-year decline. Including the 53rd week in the fourth quarter of fiscal 2024, the company expects revenue growth of 2-4%. It anticipates a 580-bps year-over-year decline in the gross margin due to higher tariff rates and the removal of the de minimis exemption, along with fixed cost deleverage and continued investment in its multi-year distribution center project. The tariff and de minimis impacts are expected to be 410 bps. Additionally, the company expects a 100-bps year-over-year increase in markdowns.
SG&A, as a percentage of sales, is expected to deleverage 100 bps year over year, driven by higher foundational investments, including related depreciation and strategic initiatives to enhance brand awareness and support growth. The operating margin for the fiscal fourth quarter is expected to decline 680 bps year over year, including a 410-bps impact of tariffs and de minimis.
EPS for the fiscal fourth quarter is expected to be $4.66-$4.76, whereas it reported EPS of $6.14 in the prior-year quarter. LULU estimates an effective tax rate of 30% for the fiscal fourth quarter.
Solid Picks in LULU’s Broader Industry
We have highlighted three better-ranked stocks from the same industry, namely Crocs Inc. (CROX - Free Report) , Guess?, Inc. (GES - Free Report) and Kontoor Brands Inc. (KTB - Free Report) .
The Zacks Consensus Estimate for Crocs’ 2025 sales and earnings indicates declines of 2.5% and 7.9%, respectively, from the year-ago period’s reported figures. CROX has a trailing four-quarter earnings surprise of 14.3%, on average.
Guess designs, markets, distributes and licenses casual apparel and accessories for men, women and children as per the American lifestyle and European fashion sensibilities. GES has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Guess’ current fiscal-year sales indicates growth of 8% from the year-ago period’s reported figure. The consensus estimate for GES earnings suggests a year-over-year decline of 13.8%. GES has a trailing four-quarter earnings surprise of 45%, on average.
Kontoor Brands, a lifestyle apparel company, designs, produces, procures, markets, distributes and licenses denim, apparel, footwear and accessories, primarily under the Wrangler and Lee brands. KTB currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Kontoor Brands’ 2025 sales and earnings indicates growth of 19.4% and 12.5%, respectively, from the year-ago period’s reported figures. KTB has a trailing four-quarter negative earnings surprise of 14%, on average.
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lululemon Surpasses Revenues & Earnings in Q3, Lifts FY25 View
Key Takeaways
lululemon athletica inc. (LULU - Free Report) reported third-quarter fiscal 2025 results, wherein revenues and earnings per share (EPS) beat the Zacks Consensus Estimate. The company’s top line improved year over year, driven by gains in the international business. Meanwhile, the bottom line declined year over year, owing to soft margins, which were impacted by higher markdowns, tariff impacts and elevated SG&A expenses.
lululemon’s fiscal third-quarter earnings per share (EPS) of $2.59 declined 9.8% from $2.87 in the prior-year quarter. However, the bottom line surpassed the Zacks Consensus Estimate of $2.22.
The Vancouver, Canada-based company’s quarterly revenues rose 7.1% year over year and on a constant-dollar basis to $2.57 billion and beat the Zacks Consensus Estimate of $2.48 billion. On both the reported and constant-dollar basis, net revenues declined 2% in the Americas and increased 33% internationally.
Total comparable sales (comps) rose 1% year over year and improved 2% on a constant-dollar basis. Comps in the Americas declined 5% on both the reported and constant-dollar basis. Internationally, comps increased 18% on both the reported and constant-dollar basis. Our model predicted a comps decline of 2.6% for the fiscal third quarter.
The Zacks Rank #3 (Hold) company has rallied 16.9% in the past three months against the Textile - Apparel industry’s 1.9% decline.
Image Source: Zacks Investment Research
LULU’s Q3 Earnings Overview
Within the Americas segment, revenues declined 1% year over year in Canada (flat in constant currency), and 3% in the United States, on both the reported and constant-dollar basis. In the International segment, revenues rose 46% in Mainland China (47% in constant currency) and 19% in the Rest of the World, on both the reported and constant-dollar basis. Comps improved 24% in Mainland China (25% in constant currency) and 9% in the Rest of the World, on both the reported and constant-dollar basis, in the fiscal third quarter.
In the store channel, the company’s total sales were flat year over year, on a constant-dollar basis. Digital revenues improved 13% year over year, contributing $1.1 billion, or 42%, to the total revenues.
The gross profit improved 2% year over year to $1.43 billion. The gross margin contracted 290 basis points (bps) to 55.6%, primarily affected by a 290-basis-point (bps) decline in the product margin, led by increased markdowns and tariff impacts. Notably, markdowns increased 90 bps, while currency headwinds had a 10-bps negative impact. These headwinds were partly offset by a 10-bps benefit from other smaller items in the gross margin. We expected the gross margin to contract 410 bps year over year to 54.4% for the fiscal third quarter.
However, management noted that the gross margin outperformed its guidance of a 410-bps decline, fueled by a stronger-than-expected top line, a lighter net tariff impact and disciplined control of fixed costs within the gross margin.
lululemon athletica inc. Price, Consensus and EPS Surprise
lululemon athletica inc. price-consensus-eps-surprise-chart | lululemon athletica inc. Quote
SG&A expenses of $988.3 million increased 8.6% from the year-ago quarter. SG&A expenses, as a percentage of net revenues, of 38.5% rose 50 bps from 38% in the prior-year quarter. The increase in SG&A expense rate was favorable versus the company’s guidance of a 150-bps increase. The better-than-expected SG&A rate was driven by prudent expense management.
Our model predicted SG&A expenses to rise 8.3% year over year for the fiscal third quarter, with a 150-bps increase in the SG&A expense rate to 39.5%.
The operating income declined 11% year over year to $435.9 million in the fiscal third quarter. The operating margin of 17% contracted 350 bps year over year. Our model predicted a 24.4% year-over-year decline in adjusted operating income to $371.1 million. We estimated the operating margin to decline 560 bps year over year to 14.9%.
Snapshot of lululemon’s Store Plans
In third-quarter fiscal 2025, LULU opened 12 net new stores, including 14 store openings and two closures. As of Feb. 1, 2026, it operated 796 stores.
In the fourth quarter of fiscal 2025, the company expects to open 17 net new company-operated stores and complete eight store optimizations. For fiscal 2025, lululemon expects 46 net new company-operated stores, which is above the prior view of 40-45 net new store openings. It expects to complete 36 co-located optimizations compared with 35 optimizations mentioned earlier.
LULU expects overall square footage growth in the low-double digits for fiscal 2025. Store openings in fiscal 2025 are expected to include 15 stores in the Americas, including about nine locations in Mexico. The rest of the store openings in fiscal 2025 are expected to occur in the international markets, primarily in China.
LULU’s Other Financial Details
lululemon exited third-quarter fiscal 2025 with cash and cash equivalents of $1 billion and no debt. The company had $593 million of capacity under its committed revolving credit facility and stockholders’ equity of $4.5 billion. At the end of the third quarter of fiscal 2025, the company’s inventories rose 11% year over year to $2 billion, with inventory units improving 4%. The capital expenditure was $167 million in the fiscal third quarter.
In the fiscal third quarter, lululemon repurchased 1 million shares for $189 million, at an average price of $181. As of Dec. 3, 2025, LULU approved a $1-billion increase to its share repurchase program. Including the new approval, the company had $1.6 billion remaining under its share repurchase authorization as of Dec. 11, 2025.
For the fiscal fourth quarter, the company anticipates dollar inventory to increase in the high-teens and inventory per unit to increase in the high-single-digits, driven by higher tariffs and adverse currency rates.
lululemon’s Targets for Q4 & FY25
LULU raised its revenue and EPS guidance for fiscal 2025. LULU anticipates net revenues of $10.96-$11.05 billion for fiscal 2025 compared with the $10.85-$11 billion stated earlier. This indicates 4% year-over-year growth versus the previously mentioned rally of 2-4%. Excluding the 53rd week in 2024, revenues are expected to rise 5-6% compared with 4-6% growth mentioned earlier.
On a segmental basis, the company expects Americas revenues to be flat to down 1%, reflecting a 1% decline in the United States and nearly stable performance in Canada. Internationally, management projects Mainland China revenues to be at or above the high-end of its guidance of 20-25% increase, while revenues for the Rest of the World are expected to increase in the high-teens.
In Mainland China, the company’s fiscal third-quarter results were strong and exceeded expectations. However, management noted that the two calendar shifts, including the earlier start of the 11/11 events, which aided the fiscal third quarter, and a later Chinese New Year compared with last year, will weigh on the fiscal fourth-quarter performance. As a result, management expects fiscal fourth-quarter revenue growth to be below the fiscal third-quarter pace.
lululemon expects a 270-bps year-over-year decline in the gross margin compared with the previously mentioned 300-bps fall. The variance from the prior guidance is mainly due to the lower estimated tariff impacts. Additionally, the company anticipated markdowns of 70 bps compared with the prior stated 50 bps.
The SG&A expense rate is expected to rise 120 bps year over year for fiscal 2025, above the prior mentioned 80-90 bps. While the company continues to manage expenses prudently, it is stepping up marketing investments in the fiscal fourth quarter to drive traffic and strengthen brand awareness.
LULU expects the fiscal 2025 operating margin to contract 390 bps year over year. The company projects an EPS of $12.92-$13.02, suggesting an increase from the $14.64 reported in fiscal 2024. The revised EPS view marks an increase from $12.77-$12.97 projected earlier. The company anticipates an effective tax rate of 30% for fiscal 2025. lululemon expects capital expenditure to be near the low-end of the prior view of $700-$720 million for fiscal 2025.
For the fourth quarter of fiscal 2025, management anticipates net revenues of $3.5-$3.59 billion, indicating a 1-3% year-over-year decline. Including the 53rd week in the fourth quarter of fiscal 2024, the company expects revenue growth of 2-4%. It anticipates a 580-bps year-over-year decline in the gross margin due to higher tariff rates and the removal of the de minimis exemption, along with fixed cost deleverage and continued investment in its multi-year distribution center project. The tariff and de minimis impacts are expected to be 410 bps. Additionally, the company expects a 100-bps year-over-year increase in markdowns.
SG&A, as a percentage of sales, is expected to deleverage 100 bps year over year, driven by higher foundational investments, including related depreciation and strategic initiatives to enhance brand awareness and support growth. The operating margin for the fiscal fourth quarter is expected to decline 680 bps year over year, including a 410-bps impact of tariffs and de minimis.
EPS for the fiscal fourth quarter is expected to be $4.66-$4.76, whereas it reported EPS of $6.14 in the prior-year quarter. LULU estimates an effective tax rate of 30% for the fiscal fourth quarter.
Solid Picks in LULU’s Broader Industry
We have highlighted three better-ranked stocks from the same industry, namely Crocs Inc. (CROX - Free Report) , Guess?, Inc. (GES - Free Report) and Kontoor Brands Inc. (KTB - Free Report) .
Crocs is one of the leading footwear brands with its focus on comfort and style. CROX flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Crocs’ 2025 sales and earnings indicates declines of 2.5% and 7.9%, respectively, from the year-ago period’s reported figures. CROX has a trailing four-quarter earnings surprise of 14.3%, on average.
Guess designs, markets, distributes and licenses casual apparel and accessories for men, women and children as per the American lifestyle and European fashion sensibilities. GES has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Guess’ current fiscal-year sales indicates growth of 8% from the year-ago period’s reported figure. The consensus estimate for GES earnings suggests a year-over-year decline of 13.8%. GES has a trailing four-quarter earnings surprise of 45%, on average.
Kontoor Brands, a lifestyle apparel company, designs, produces, procures, markets, distributes and licenses denim, apparel, footwear and accessories, primarily under the Wrangler and Lee brands. KTB currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Kontoor Brands’ 2025 sales and earnings indicates growth of 19.4% and 12.5%, respectively, from the year-ago period’s reported figures. KTB has a trailing four-quarter negative earnings surprise of 14%, on average.