tapebrief
LULU · Q3 2025

LULU · Q4 2025 Earnings

Bearish

Lululemon Athletica

Reported March 17, 2026

30-second summary

Lululemon beat its Q4 guide on every line (revenue $3.64B vs $3.50–3.585B; GAAP EPS $5.01 vs $4.66–4.76) and beat its FY EPS guide ($13.26 vs $12.92–13.02) but used the March guide-setting event to confirm what last quarter implied: FY2026 revenue growth of 2–4% decelerates from FY2025's 5% reported (7% ex-53rd week) to 2–4%, North America is guided down 1–3%, FY operating margin is guided down ~250bps with gross margin down ~120bps, and management now explicitly frames the U.S. recovery as extending "into 2027." Tariffs are quantified at $380M gross with only $160M of identified offsets — leaving $220M net to compress margins. The Q4 beat is partly calendar-week noise (53rd week comp) and the gross margin landed better than the ~580bps total decline guide; the FY2026 guide is the actual disclosure event, and it is worse than the bear-case framing carried into the print.

Headline numbers

EPS

Q4 FY2025

$5.01

Revenue

Q4 FY2025

$3.64B

+1.0% YoY

Gross margin

Q4 FY2025

54.9%

Operating margin

Q4 FY2025

22.3%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$3.64B+1.0%$2.57B+41.9%
EPS$5.01—$2.59+93.4%
Gross margin54.9%—55.6%-70bps
Operating margin22.3%—17.0%+530bps

Guidance

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

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ4 FY2025$3.500 billion to $3.585 billion$3.64 billion+$0.055 billion above high end of guideBeat
Diluted EPS (GAAP)Q4 FY2025$4.66 to $4.76$5.01+$0.25 above high end of guideBeat
RevenueFY 2025$10.962 billion to $11.047 billion$11.1 billion+$0.053 billion above high end of guideBeat
Diluted EPS (GAAP)FY 2025$12.92 to $13.02Not disclosed—Beat

New guidance

MetricPeriodGuideYoY
Revenue (YoY growth)FY 20262% to 4%—
Diluted EPS (GAAP)FY 2026$12.10 to $12.30—
Gross Margin (YoY change)FY 2026decrease approximately 120 basis points—
Operating Margin (YoY change)FY 2026decrease approximately 250 basis points—
North America Revenue (YoY growth)FY 2026down 1% to 3%—
China Mainland Revenue (YoY growth)FY 2026up approximately 20%—
Rest of World Revenue (YoY growth)FY 2026mid-teens—
Revenue (YoY growth)Q1 FY2026$2.400 billion to $2.430 billion (1% to 3% YoY)+1% to +3% YoY

Platform metrics

Q4 FY2025
SegmentQ4 FY2025
Comparable sales growth3%
Americas comparable sales growth-1%
International comparable sales growth20%
Company-operated stores811
Store square footage (thousands)3,736
Inventory increase YoY18%
Inventory increase on unit basis6%

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Share repurchases (millions)1.4

Management tone

The single most consequential disclosure this quarter is a phrase, not a number: "an improvement in overall trends in North America will likely progress over the course of the year and into 2027 as we return to a healthier baseline of full price sales." Last quarter the qualitative framework pointed to 2026 as the year of "most significant benefits." This quarter the recovery now extends into 2027. The inflection has moved further right.

The tariff frame got more quantified and more painful. The 2025 actual gross tariff cost was $275M with $62M of offsets — a $213M net hit. FY2026 guides to $380M gross with $160M of offsets, leaving $220M net to compress margins. CFO Meghan Frank: "We anticipate gross tariff impact of approximately $380 million in 2026, with offsets of approximately $160 million within gross margin." FY2026 gross margin is guided down ~120bps on top of FY2025's already-compressed 260bps decline. The $220M net is the run-rate hit.

Management's confidence-signaling vocabulary leaned heavily on internal validation. The notable phrase: "we've seen an increase in employee purchases as we introduce new innovations and product, which is an optimistic indicator that we're on the right path." When an $11B brand cites employee purchasing as a key positive demand signal, it is because the customer signals are not yet fully legible. Management did acknowledge they "maintained share in the total apparel market and... lost about less than a point in activewear" — the first explicit admission of activewear share loss.

The CEO transition language hardened rather than resolved. This quarter the disclosure adds: "with respect to the CEO search, I can share that our board is running a robust search process, and they've been meeting with highly qualified candidates," paired with Chip Bergh (former Levi's CEO) joining the board "due to his extensive experience guiding successful transformations." Bergh's biographical descriptor — "transformations" — is the tell. The board is signaling a turnaround governance posture, not continuity. The permanent CEO has not been named going into the FY2026 guide-setting event, which is the single highest-information moment of the year.

One restraint deserves note: the FY2026 store-opening guide held at 40–45 net new, in line with FY2025's 44. The mix shifted toward international (25–30 of the 40–45, with North America at ~15 including eight in Mexico). Management cited NSO ROI above 100% with sub-one-year payback and top-store productivity above $1,400/sqft to defend the commitment.

Recurring themes management leaned on this quarter:

Full-price sales recovery and markdown reduction in North AmericaProduct innovation and newness acceleration (Unrestricted Power, ShowZero, Thermozone)Tariff mitigation and enterprise efficiency cost managementBrand activation and experiential marketing (Studio Yet, BNP Paribas, Olympics)International momentum, particularly China mainland and South Korea growthStore experience elevation through design playbook and localization

Risks management surfaced:

North America revenue expected down 1-3% in 2026; continued headwinds noted as multi-year challengeTariff costs of $380M gross in 2026, requiring nearly complete offset through mitigationMarkdown penetration elevated in 2025; modestly improving but not normalizedOperating margin compression of 250 basis points expected in 2026Proxy contest costs and one-time expenses layering into 2026

Q&A highlights

Brooke Roach · Goldman Sachs

When will product assortment deliver North America growth inflection, and how is management thinking about markdown removal headwinds and full-price selling product introduction throughout the year?

Management expects meaningful inflection in Q1 relative to Q4, approximately flat full-price trend in Q2, and positive in H2. Markdown penetration is being lowered (130 bps up in Q4, 60 bps for 2025; modest improvement expected in 2026 H2). Management is seeing improvement to date with new product launches driving full-price momentum.

Q1 meaningful inflection vs Q4Q2 approximately flat full-price trendH2 full-price flipping positiveMarkdown penetration up 130 bps in Q4, up 60 bps for 2025

Adrian Yee · Barclays

Can you detail the 35% newness metric (styles vs colorways vs SKUs), what products are being sunset, how the merchandising organization decision-making works, and what portion of CapEx is AI-driven?

The 35% newness in 2026 (vs 23% in 2025) represents truly new product never seen by guests, not just colorways. SKU reduction is part of the strategy. Jonathan Chung (creative director) and Liz Binder (chief merchant) both report to management and work together on shifts. CapEx includes AI investments focused on guest-facing initiatives, go-to-market calendar enhancement, and enterprise enablement strategy.

Newness penetration moving from 23% (2025) to 35% (2026)35% represents entirely new products, not colorwaysSKU reduction part of assortment strategyJonathan Chung and Liz Binder report directly to management

Laurent Veselescu · BNP Paribas

Can you unpack North American full-price realization percentages (current vs historical), where it should go for 2026? Also, what portion of store expansion is committed for 2026 and where should marketing spending go as percent of sales?

Management did not provide specific penetration percentages but confirmed Q4 had lowest waterline with 130 bps markdown pressure. Sequential improvement expected through year, flipping flat in Q2, positive in H2. For stores: 40-45 net new openings planned for 2026 (~15 in NAM, 25-30 international, majority mainland China), yielding low double-digit square footage growth. Marketing spending expected relatively flat as percent of sales in 2026, with shift in composition toward activations and influencers.

40-45 net new store openings planned for 2026~15 openings in North America (majority in Mexico)25-30 international openings (majority mainland China)Low double-digit square footage growth target

Paul Legere · Citi Research

Are management satisfied with full-price selling in international markets and China relative to North America? Have newness percentages declined in those regions and are they expected to increase in 2026?

Management has not seen same full-price headwinds in international regions as in North America and is pleased with trends there. International model emphasizes brand-first approach, diversified product portfolio, focus on full-price/minimal discounting, elevated store presentation, and grassroots community approach. New product creation and activations at global level will benefit all regions.

International regions showing stronger full-price performance than North AmericaInternational model: brand-first approach, diversified portfolio, obsession with full-price/minimal discountingElevated store presentation and online experience in international marketsCommunity grassroots approach maintained

Michael Benetti · Evercore

What's driving slower Canada sales outlook in Q1? What progress is being made on shortening design-to-market timeline (historically 18+ months)?

Canada consumer is more sensitive to markdown, so experiencing more pronounced impact from full-price inflection strategy. Canadian market expected to reset to better waterline through assortment shifts and activations. Design-to-market calendar expected to compress from 18-24 months currently to 12-14 months over time, driven by tools, process, systems, automation, and AI. New head of technology with AI focus recently hired.

Canada consumer showing higher markdown sensitivity than USCurrent go-to-market calendar: 18-24 monthsTarget go-to-market calendar: 12-14 monthsFocus on tools, process, systems, automation, and AI to drive compression

Answers to last quarter's watch list

Q4 gross margin versus the ~580bps total YoY decline guide — Q4 gross margin landed at 54.9% (-550bps YoY), better than the -580bps guide. Tariff impact was disclosed at 520bps in the quarter; CFO attributed the GM upside to a lower tariff impact via regional mix. The 2026 tariff framework: $380M gross / $160M offset / $220M net, stepping up from 2025 actuals of $275M / $62M / $213M.
Resolved negatively
U.S. comp progression — Americas comps recovered to -1% in Q4 (U.S. revenue -6% reported, -1% ex-53rd week). FY2026 North America is guided down 1–3% — meaning management does not expect Q4-level comp performance to translate into reported revenue growth.
Continue monitoring
March 2026 guide-setting — the guide arrived: FY2026 revenue +2% to +4%, EPS $12.10–$12.30 (down from $13.26), operating margin down ~250bps, gross margin down ~120bps. Tariff net impact at $220M. Store openings held at 40–45 but with mix shifted away from the U.S.
Resolved negatively
Permanent CEO appointment — no permanent CEO named going into FY2026. Board search is "running" with no timeline; Chip Bergh added to the board explicitly for transformation experience. The interim co-CEO structure has been in place through this guide-setting event.
Not resolved
Newness penetration evidence — newness moves from 23% in FY2025 to a targeted 35% in FY2026, with management confirming in Q&A this is genuinely new product. But no Spring 2026 sell-through data was disclosed in hard numbers; the only positive demand signal explicitly cited was rising employee purchase rates. Q1 inflection is promised; proof points remain prospective.
Continue monitoring
High-value guest re-engagement — no disclosed retention metric, frequency metric, or activation framework specific to high-value guests. In Q&A, management said it was "early in the quarter" to comment on the high-value guest specifically.
Not resolved

What to watch into next quarter

Q1 FY2026 revenue vs the $2.40–$2.43B guide and Americas comp — Q1 is the "meaningful inflection" quarter per management's framing for full-price selling. A Q1 print below the midpoint, or North America worse than the mid-single-digit decline guided, breaks the H2 acceleration math behind the FY +2–4% guide.

Gross margin progression vs the ~-380bps Q1 guide (-120bps FY) — Q1 carries the heaviest tariff load (~290bps gross drag, ~110bps offset). Watch for whether Q1 GM declines materially more than ~380bps; a worse print would mean the $160M offset assumption for the year is breaking and the $220M net tariff number understates the actual drag.

Permanent CEO appointment — the search has now spanned this quarterly guide-setting event. A board move within the next quarter — particularly an external hire from a transformation background — would meaningfully change the strategic posture; continued silence implies the search is harder than disclosed.

Spring 2026 newness sell-through data — the entire FY2026 H2 recovery thesis depends on the 35% newness penetration landing. Q1 prepared remarks should provide the first hard read on full-price reception of new product.

Tariff offset closure — the unaddressed net of $220M is the single biggest determinant of whether FY2026 op margin actually lands at -250bps or worse. Watch for incremental vendor renegotiation disclosures, pricing actions on hero franchises, or DC network restructuring updates.

High-value guest disclosure — management deferred on the high-value guest cohort this quarter. A return to the topic with any metric attached (frequency, retention, share-of-wallet) would be a positive signal; continued silence implies the problem persists without a measurement framework.

Sources

  1. Lululemon Athletica Q4 FY2025 Press Release (quarter ended February 1, 2026), SEC EDGAR: https://www.sec.gov/Archives/edgar/data/1397187/000139718726000019/lulu-20260201xex991.htm
  2. Lululemon Q4 FY2025 earnings conference call — prepared remarks and Q&A, March 17, 2026

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