VALUATION HIGHLIGHTS

1. Americas constitute 61% of the Trefis price estimate for Lululemon Athletica's stock.
2. China Mainland constitutes 17% of the Trefis price estimate for Lululemon Athletica's stock.
3. Rest of World constitutes 14% of the Trefis price estimate for Lululemon Athletica's stock.

WHAT HAS CHANGED?

Lululemon Q4 2025 Snapshot

Lululemon Athletica reported a mixed but broadly resilient Q4 FY2025, with results that exceeded expectations but highlighted slowing growth and margin pressure. Revenue rose 1% year over year to $3.6 billion, while EPS came in at $5.01, beating estimates but declining from $6.14 in the prior year. Operating margin contracted to 22.3%, and gross margin fell 550 basis points to 54.9%, reflecting higher costs, tariffs, and increased discounting. Performance remained uneven across regions, with Americas revenue declining 4% and comparable sales down 1%, while international revenue grew 17% with a 20% increase in comparable sales, driven by strong momentum in China.

Note: Lululemon's FY'25 ended on February 1, 2026.

Outlook

Lululemon provided a cautious FY2026 outlook, signaling a clear slowdown in both growth and profitability. The company guided for revenue of $11.35 billion to $11.50 billion, implying roughly 2% to 4% growth, while EPS is expected to range between $12.10 to $12.30, representing a year-over-year decline from FY2025 levels.

Management expects continued weakness in North America, softer consumer demand, and ongoing margin pressure from tariffs, which alone are projected to reduce gross profit by about $380 million in 2026. At the same time, the company is investing in a product refresh cycle, reducing SKU complexity, and shifting toward higher full price selling to rebuild brand positioning and improve margins over time.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Lululemon Athletica's value that present opportunities for upside or downside to the current Trefis price estimate:

Apparel

• International Revenue Growth: International sales are growing at a faster pace than the core North American business. If this segment sustains growth above 25% annually versus a lower Trefis assumption, it could drive meaningful upside to valuation through both revenue expansion and margin leverage.
• Gross Margin Expansion: Lululemon has benefited from lower markdowns and strong pricing power. If gross margins expand beyond current expectations due to premium positioning and supply chain efficiencies, profitability could exceed estimates. Conversely, increased promotional activity or input cost pressures could compress margins.

For additional details, select a driver above or select a division from the interactive Trefis split for LULU at the top of the page.

BUSINESS SUMMARY

Lululemon Athletica Inc. is a manufacturer of yoga-inspired athletic wear. The company's products include performance apparel and accessories for women, men, and young girls. The apparel assortment includes items such as fitness pants, shorts, tops, and jackets, and is designed for healthy lifestyle activities and general fitness.

Lululemon's products are sold through company-owned stores and showrooms, the company website, and several strategic partners. The company also sells products with small visual or design defects through its factory outlets or specially organized warehouse sales. Its products are manufactured in factories in Canada, the United States, Peru, China, Taiwan, South Korea, Israel, India, Bangladesh, Indonesia, Malaysia, Cambodia, Sri Lanka, Vietnam, and Switzerland.

The company operates in over 25 countries around the world and organizes its operations into four regional markets: Americas, China Mainland, Asia Pacific (APAC), and Europe and the Middle East (EMEA). They report three segments, Americas, China Mainland, and Rest of World, which comprises the APAC and EMEA regions on a combined basis.

SOURCES OF VALUE

Lululemon derives a significant portion of its value from its core apparel segment, particularly women's products, which anchor brand identity and pricing power.

Premium Brand Positioning

Lululemon's ability to command premium pricing stems from strong brand equity, product innovation, and a loyal customer base. This positioning supports higher average selling prices and reduces reliance on discounting.

Direct-to-Consumer Strength

A large share of revenue comes from direct channels, including e-commerce and owned stores, enabling better margin control, customer data insights, and inventory management compared to wholesale-driven peers.

International Growth Runway

Markets outside North America remain underpenetrated, offering a long runway for store expansion and digital growth, particularly in China where demand for premium activewear is rising.

KEY TRENDS

Some of the key factors driving Lululemon's stock value are unique to the company. These include:

1. The "scarcity" model

Lululemon's stores are usually known for keeping a low inventory of new products and quick turnover of said inventory. This means that customers loyal to the brand are generally aware that if they like a product, they had better purchase it right away because it might not be there the next time they visit the store. Additionally, the company rarely offers sales, which means that customers have to pay the full price for products at all times.

Rising Demand for Athleisure

The global shift toward health, wellness, and casual wear continues to drive demand for athleisure products. Lululemon is well-positioned to benefit due to its strong brand and innovation in performance fabrics.

Men's Category Expansion

The company is investing in expanding its men's product line, aiming to diversify revenue streams beyond its traditional women's segment. Continued traction here could significantly increase the total addressable market.

Digital and Omnichannel Integration

Lululemon is enhancing its digital capabilities and integrating online and offline experiences, improving customer engagement and driving higher conversion rates across channels.

2. Expensive products

Lululemon has crafted for itself a reputation as an apparel company that makes aesthetically pleasing, reliable, and functional products. While the company has been working on improving the fit and fabric of its products, it has still managed to gain for itself a strong and loyal customer base. These are some of the reasons why it manages to charge a high premium for its products.