LULU · Q3 2025 Earnings

Cautious

Lululemon Athletica

Reported December 11, 2025

30-second summary

Lululemon beat its own Q3 guide handily — revenue $2.566B vs $2.470–2.500B and GAAP EPS $2.59 vs $2.18–2.23 — and raised FY revenue and EPS guides modestly, but the underlying U.S. trend deteriorated again with Americas comps -5% (from -3% in Q2 and -2% in Q1) and management now explicitly framing the "most significant benefits" of the turnaround as a 2026 event. Q4 gross margin is guided down ~580bps YoY (410bps from tariffs/de minimis, balance from fixed-cost deleverage and DC investments), and the CEO transition was disclosed, with co-CEO structure during what is now a multi-quarter reset. The Q3 beat is not the story; the story is that the U.S. consumer keeps getting worse while the recovery timeline keeps moving right.

Headline numbers

EPS

Q3 FY2025

$2.59

Revenue

Q3 FY2025

$2.57B

+7.0% YoY

Gross margin

Q3 FY2025

55.6%

Operating margin

Q3 FY2025

17.0%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$2.57B	+7.0%	$2.52B	+1.6%
EPS	$2.59	—	$3.10	-16.5%
Gross margin	55.6%	—	58.5%	-290bps
Operating margin	17.0%	—	20.7%	-370bps

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q3 FY2025	$2.470 billion to $2.500 billion	$2.566 billion	+$0.066 billion above high end of guide	Beat
Diluted EPS (GAAP)	Q3 FY2025	$2.18 to $2.23	$2.59	+$0.36 above high end of guide	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	Q4 FY2025	$3.500 billion to $3.585 billion	—
Revenue Growth (reported basis)	Q4 FY2025	-3% to -1%	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2025	$10.850 billion to $11.000 billion	$10.962 billion to $11.047 billion	Low +$0.112B, High +$0.047B	Raised
Diluted EPS (GAAP)	FY2025	$12.77 to $12.97	$12.92 to $13.02	Low +$0.15, High +$0.05	Raised
Revenue Growth (reported basis)	FY2025	2% to 4%	4%	Low +2pts (from 2%), High 0pts (held at 4%)	Raised
Revenue Growth (excluding 53rd week)	FY2025	4% to 6%	5% to 6%	Low +1pt, High 0pts	Raised
U.S. Revenue Growth (constant currency)	FY2025	down 1% to 2%	-1% to -2%	Low -1pt (to -1%), High 0pts (held at -2%)	Raised
China Mainland Revenue Growth (constant currency, excluding 53rd week)	FY2025	20% to 25%	at or above high end of 20% to 25%	Low ≥0pts (at 25%), High unbounded above 25%	Raised
Rest of World Revenue Growth (constant currency, excluding 53rd week)	FY2025	approximately 20%	high teens	Low -1pt to -2pts (from ~20% to 'high teens')	Raised

Platform metrics

Q3 FY2025

Segment	Q3 FY2025
Comparable Sales Growth	1%
Comparable Sales Growth (constant dollar)	2%
Company-operated Store Count	796
Net New Stores (Q3)	12
Inventory Growth	11%
Inventory Growth (units)	4%

Other KPIs

Q3 FY2025

Segment	Q3 FY2025
Americas Comparable Sales	-5%
International Comparable Sales	18%

Management tone

Hyper-growth (pre-2025) → Tariff defense, position of strength (Q1) → Product accountability and 2026 reset (Q2) → CEO transition with U.S. inflection pushed out further (Q3)

The most consequential shift this quarter is timing. Q2's frame was that 2026 product would deliver the inflection; this quarter management said "we expect to see the most significant benefits of our work streams in 2026" — language that pushes the meaningful payoff further into the year, and pairs it with an acknowledgment that "we expect revenue trends in the U.S. in Q4 to be modestly improved relative to Q3" while also admitting Thanksgiving-week trends slowed. The bull case requires Spring 2026 newness to work; management is now hedging on when within 2026 it actually shows up.

The product-strategy admission, which Q2 introduced, sharpened this quarter into operational language. Management: "The assortments you currently see in stores and online include certain styles that are not representative of our go-forward vision for the brand... we've let product life cycles run too long within some of our key franchises." Reading that next to Q1's "we are gaining share in premium activewear" is the multi-quarter arc — management has moved from defending the assortment, to accepting it was stale, to telling investors the assortment currently visible is not the brand they want. That is a near-admission that Q4 and Q1 FY2026 will continue to disappoint at the comp line because there is no product fix coming until Spring 2026.

The high-value guest language, new this quarter, may be the most damaging line: "We've not inspired our high value guests to purchase as we had in the past." This is the revenue-driver cohort. Q1 characterized the U.S. consumer as cautious; Q2 characterized core franchises as fatigued; Q3 names a specific customer segment Lululemon has lost engagement with. The progression is from macro, to product, to specific customer cohort — each more diagnostic and harder to fix quickly.

Tariffs evolved again. Q1 framed them as a manageable headwind. Q2 quantified $320M of 2026 gross drag with ~$160M of offsets and called out de minimis exemption removal as ~170bps of the 220bps tariff-related FY decline. Q3 reaffirmed the de minimis impact and disclosed the Q4-specific magnitude at 410bps — "the impact from tariffs and de minimis combined will be approximately 410 basis points." The tone moved from "we are mitigating" to "we are restructuring the DC network and selectively pricing" — Canada DC network changes, item-by-item pricing based on elasticity tests, and an explicit deferral of 2026 margin guidance to March. Management declined three separate analyst probes on the quantum of 2026 net tariff impact.

Finally, the store-expansion walkback: "While stores remain an important part of our Omni ecosystem, we acknowledge that revenue trends in the U.S. are not where we'd like, and we are closely looking at all potential store openings as we plan for 2026." Last quarter the store guide was simply trimmed at the optimization line; this quarter the entire 2026 U.S. opening pipeline is under review. Capital allocation is starting to follow the demand signal.

Recurring themes management leaned on this quarter:

U.S. business inflection delayed to 2026 with structural product and merchandising changes requiredProduct pipeline overhaul with new style penetration targeting 35% in spring 2026Tariff impact intensifying with 410 bps headwind in Q4 alone requiring pricing and supply chain mitigationLeadership transition and interim co-CEO structure during critical turnaround periodInternational momentum strong but U.S. guest frequency and high-value customer spend decliningEnterprise efficiency focus heightened by tariff environment and de minimis exemption removal

Risks management surfaced:

U.S. comparable sales decline continuing with modestly improved but still negative Q4 outlookTariff and de minimis removal creating 410 bps margin headwind in Q4 with ongoing structural impactProduct assortment refresh delayed until spring 2026 leaving current merchandising uncompetitive through year-endHigh-value guest engagement weakness requiring new product and activation strategies to restore frequency and spendCalendar headwinds in China Q4 from 11.11 timing shift and later Chinese New Year reducing growth momentum

Q&A highlights

Matthew Boss · JP Morgan

Cadence of U.S. demand in Q3, trends quarter-to-date including post-Black Friday slowdown, and timeline for product assortment optimization

Q3 demand progressed as expected with August as strongest month and October softest (planned). Strong Thanksgiving results but pullback post-Thanksgiving reflected in guidance. Product assortment newness penetration to increase in Q1 with marketing activation across channels.

August was strongest month of Q3October was softest month (planned based on prior year activities)Strong Thanksgiving period performancePost-Thanksgiving traffic pullback reflected in guidance

Brooke Roach · Goldman Sachs

Performance of largest franchises (performance category, lounge, social), whether core franchises warrant a reset, and proof points on new design language confidence

Growth continuing in performance activity categories (run, train, yoga, golf, tennis) with innovation. Lounge seeing headwinds but strong response to Scuba updates with new materials/silhouettes. Small in-store tests in LA/Miami showing strong results for de-assorted, newness-focused merchandising with plans to roll out. Online web redesign platform enabling better newness visibility.

Innovation planned across run, train, yoga, golf, tennisGrowth in social category on back of newness like DaydripScuba updates with new materials and silhouettes showing great responseIn-store visual merchandising tests in LA and Miami showing very good results

Michael Benetti · Evercore

Details on trade-down behavior observed, pricing strategy implications, and Canada distribution center plans given de minimis provision removal

Trade-down behavior observed throughout year as consumers seek value/savings. Pricing strategy remains selective and item-by-item based on positive elasticity. De minimis news prompts evaluation of DC network; changes expected but Canada presence maintained. More details to come in 2026.

Trade-down behavior seen throughout year and into Q3Selective, item-by-item pricing approach with positive elasticity resultsDe minimis provision removal triggers DC network evaluationCanada presence will continue but with network changes

Mark Altrager · Baird

Specific tariff and de minimis impact figures, progress areas, and updated gross/net impact projections for 2024-2025

2024 tariff outlook improved from 220 to 190 basis points (approximately $210M net impact). 2025 impact estimated at $320M but no specific breakdown given. Progress areas: vendor negotiations, DC network, inventory placement, and operational efficiencies. Updated guidance to come in March.

2024 tariff pressure reduced from 220 to 190 basis points2024 net tariff impact approximately $210 million2025 tariff impact estimated at $320 millionProgress in vendor negotiations, DC network optimization, inventory placement

Jason · UBS

Clarification on reporting structure during CEO transition, specifically product/merchandising/design decision authority

Product, merchandising, and design report to Megan (CFO) during search process. Co-CEO Andre takes chief commercial officer role globally. Team operates as peers. Most Q1 2026 product decisions already completed; winter 2026 lineup finalizing. Foundation in place for execution.

Product, merchandising, and design reporting to MeganBrand also reporting to MeganAndre McLean as chief commercial officer for global marketsMost product/merchandising decisions for first half 2026 already made

Answers to last quarter's watch list

Q3 gross margin versus the -410bps YoY guide — Q3 GM came in at 55.6% (-290bps YoY), better than the -410bps guide, similar to the Q2 dynamic where actual margin held up better than the guide. But Q4 GM is now guided down ~580bps YoY with 410bps from tariffs/de minimis, so the H2 tariff math has moved from Q3 into Q4 rather than improving.

Continue monitoring

U.S. comp progression into holiday — Americas comps deteriorated to -5% from Q2's -3%, worse than the -4% bear-case threshold set last quarter. Management acknowledged Thanksgiving-week trends slowed and Q4 is only "modestly improved." The framing of "stabilizing in line with annual guide" was effectively abandoned.

Resolved negatively

2026 tariff offset specificity — management explicitly declined to update the $320M 2026 estimate or provide incremental offset detail, deferring everything to March. Pricing is now described as item-by-item based on elasticity tests, and DC network restructuring around de minimis was newly disclosed — but no quantification.

Resolved negatively

Spring 2026 newness reads — management said most Q1 2026 product decisions are already made and winter 2026 is finalizing, with in-store tests in LA and Miami showing strong response to de-assorted, newness-focused merchandising. The 35% Spring 2026 newness penetration target was reaffirmed. No specific sell-through indicators were shared.

Continue monitoring

China Mainland holding above 20% — China is now tracking at or above the high end of the +20–25% FY range, the strongest disclosure since Q1. International momentum strengthened (Rest of World was the modest trim from ~20% to high teens).

Resolved positively

Capital allocation — board authorized a $1.0B increase to the buyback program, bringing remaining capacity to ~$1.6B as of December 11. The 46 net new store guide held for 2025, but 2026 U.S. openings are under review — a directional walk-back from the prior expansion posture.

Continue monitoring

What to watch into next quarter

Q4 gross margin versus the ~580bps total YoY decline guide — 410bps of that is structural tariff/de minimis impact landing cleanest in this quarter. A worse-than-580bps print, or a worse-than-410bps tariff component, means the 2026 starting point is lower than the $320M framework implies.

U.S. comp progression — Americas comps have gone -2% → -3% → -5% in three quarters. A Q4 print at -5% or worse, despite the "modestly improved" framing, would indicate the deterioration is accelerating and Spring 2026 product cannot land soon enough.

March 2026 guide-setting — management deferred all 2026 margin, tariff offset, and store-opening specifics to March. The single highest-information event between now and the next print is the FY2026 guide initiation. Watch for whether net tariff impact comes in below or above the $160M unaddressed gap and whether U.S. store openings are cut.

Permanent CEO appointment — the interim co-CEO structure during a turnaround with $320M of 2026 cost headwinds and a stale assortment is a high-risk governance posture. An external CEO hire could imply more dramatic strategic change; an internal elevation would suggest continuity.

Newness penetration evidence — Q4 prepared remarks should provide the first hard sell-through data on the LA/Miami merchandising tests and any early Spring 2026 buy reception. Without measurable proof points the Spring 2026 inflection remains a story.

High-value guest re-engagement — management explicitly named this cohort as having disengaged. Watch for either a disclosed retention/frequency metric or a strategic activation framework in the Q4 call; absence would suggest no near-term fix.

Sources

Lululemon Athletica Q3 FY2025 Press Release (quarter ended November 2, 2025; release dated December 11, 2025), SEC EDGAR: https://www.sec.gov/Archives/edgar/data/1397187/000139718725000054/lulu-20251102xex991.htm
Lululemon Q3 FY2025 earnings conference call — prepared remarks and Q&A, December 11, 2025

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