LULU: Comeback or Flash in the Pan?

$Lululemon(LULU.US) LULU: Rebound or Blip?

Lululemon reported Q3 FY2025 (quarter ended Sep 2025) after the U.S. close on Dec 12 Beijing time. Despite two straight guide-downs, results beat the top end of guidance, a low-bar beat that cleared expectations.

Key takeaways below. We break down revenue, regions, product cadence, store rollout, margins, and outlook.

1) Revenue beat cons. Q3 revenue was $2.57bn (+7.1% YoY), above Street expectations. Strength in Intl helped avoid the further deceleration implied by last quarter’s 3%-4% guide, keeping the growth trend broadly in line with the prior two quarters.

2) China back as the growth engine. North America, the home market, remained soft with revenue of $1.38bn (-1.5% YoY), and AOV, conversion, and store traffic all declined.China grew 43% YoY, a one-year high. Dolphin Research believes the Align 10th anniversary campaign boosted brand momentum, while heavier discounts on non-core and in-season styles accelerated legacy inventory cleanup per the call.

3) Faster product drops. Women’s, the core business, delivered $1.65bn (+5.7% YoY), slightly ahead of cons. After org changes earlier this year, tighter design–merch coordination improved the launch cadence, and newness contributed more than expected.Men’s revenue was $600mn (+8.1% YoY). Momentum ticked up vs. the prior two quarters, albeit modestly.

4) Steady Intl store openings. As of Q3, total stores reached 796, a net add of 12 QoQ.China led the openings, prioritizing larger, experience-driven formats with community space and yoga/fitness zones to deepen engagement and stickiness.

5) GPM pressure weighed on profitability. Tariffs and the removal of de minimis (effective Aug) lifted supply chain costs, driving GPM down 290bps YoY to 55.6%. With Intl expansion, hiring and compensation rose, nudging the opex ratio up 50bps.On Dolphin Research estimates, core OPM came in at 17.1%, down 340bps.

6) FY guide raised. The company guides Q4 revenue -1% to -3% YoY. Full-year growth was lifted from 2%-4% to 4%-6%.

7) Financial snapshot

Dolphin Research view:

While Q3 fundamentals remained subdued, two prior disappointing quarters had already reset the bar, so the positive surprise narrowed the expectations gap and supported some multiple repair.At the margin, Lululemon is addressing share losses in North America from weak demand and style fatigue by streamlining org structure, appointing a new global creative head, and improving design-to-production efficiency to speed up refresh cycles. Near-term results haven’t fully turned, but directionally the company appears to be tackling the right issues.

Fundamentally, the prior ‘double whammy’ was tied to a product-cycle mismatch. As discussed before, much of Lululemon’s recent ‘innovation’ was color and silhouette, not fabric, which alienated loyal users and led to inventory build.

If these changes can reignite consumer excitement about fabrics, the odds of returning to double-digit growth look decent over the medium term, as fabric innovation is core to the brand DNA.

On the call, Lululemon indicated broad-based promotions on off-season and slow-moving SKUs. Inventory must normalize before the company can enter the next product cycle with a lighter balance sheet.

On valuation, after a ~10% after-hours pop, the 2026E multiple has moved from ~11x to ~13x. Downside from further de-rating looks limited.But until a clear newness-led recovery shows up in the P&L, we see this more as multiple repair than an inflection. For conservative investors, we suggest trading the 10x–15x band, implying a market cap range of ~$18.3bn–$27.4bn.

I. Investment framework

By disclosure, Lululemon’s revenue comes mainly from Women’s, Men’s, and Other. We outline these to set up the deeper dive below.

Women’s: the profit pillar. Since inception, Women’s has been the core revenue stream and still accounts for over 60%. The line centers on yoga pants, complemented by hoodies, outerwear, and tees, with fabrics spanning indoor training and everyday athleisure basics.

Men’s: late start, second growth curve. Launched in 2013, Men’s replicated the Women’s playbook, leading with fabric-centric comfort and style. Off a smaller base, Men’s has outgrown Women’s in recent years, and management’s 5-year plan (set in 2022) targets a doubling by 2026.

Other: high-margin supplement. ‘Other’ includes footwear, accessories, and Lululemon Studio (fitness experience). Though smaller than apparel, it carries higher margins and growth.Footwear, launched in 2022, is a priority but remains in early stages.

II. Revenue beat cons

Q3 revenue was $2.57bn (+7.1% YoY). Thanks to Intl strength, overall growth didn’t decelerate further vs. the prior 3%-4% guide and stayed broadly in line with the last two quarters, a middling but steady print.

II. Faster innovation cadence

By category, Women’s delivered $1.65bn (+5.7% YoY), slightly faster than Q2. To combat style fatigue, org changes earlier this year improved design–merch sync and sped up drops.In Q3, the brand lifted the mix of newness in casual/social wear via fabric innovation and fresh silhouettes/colors, e.g., the Scuba Waffle series, a lighter, more breathable take on Scuba, sold well in North America and APAC. It has rekindled long-time customers’ interest in fabric innovation.

Men’s posted $600mn (+8.1% YoY), roughly flat mix vs. last year. On product, Lululemon launched ShowZero polos to address sweat-stain concerns, targeting business-casual and golf, and iterated on Metal Vent Tech (performance training) and Zeroed In (light/quick-dry) to improve breathability and comfort.That said, Men’s remains in transition from dependence on classics to newness-driven growth. Per the call, the newness mix is slated to rise from ~23% now to ~35% by the 2026 Lunar New Year period.

Marketing-wise, the ‘Stretch Your Limits’ campaign led by Korean actor Park Seo-joon aims to break the perception of Lululemon as a women’s yoga brand and attract more male consumers across APAC and globally.

Dolphin Research believes that, for both Men’s and Women’s, org changes and refocusing on product innovation happened this year, and newness needs time to build word-of-mouth and repeat. The more realistic window to judge impact is 2026.

Other (accessories, bags, footwear, lifestyle) delivered $330mn (+12.2% YoY), with yoga mats and bags outperforming.

III. China again the standout

By region, North America stayed weak with $1.38bn in revenue (-1.5% YoY). AOV, conversion, and store traffic were all lower.Dolphin Research has argued the U.S. share loss stems from overextended lifecycles of classics and waning novelty. With quick-turn design, supplier coordination, and a new global creative lead, the NA refresh cadence is improving; results haven’t yet reflected it, but directionally it is the right remedy.

China delivered $510mn (+42.5% YoY), the fastest in a year. On the call, online growth far outpaced offline.Dolphin Research believes heavier discounting online—via live commerce and member coupons—than in offline stores (which offer limited gifts mainly at openings) helped clear off-season, non-classic SKUs by using price to speed inventory turnover.

Rest of world revenue was $320mn (+15.7% YoY). Growth decelerated vs. the prior two quarters and was underwhelming.

IV. Store rollout steady

As of Q3, total stores reached 796, a net add of 12 QoQ. The full-year plan remains 40–45 openings globally, tracking steadily so far.

China leads openings and has shifted from minimal-cost boxes to experiential retail. Larger formats integrate community space and yoga/fitness zones to raise engagement and community stickiness.

Intl focus remains on EMEA (e.g., Spain, Italy) and high-potential APAC markets like Korea and Japan. New-market entry is cautious at first; once product and pricing gain traction with local consumers, the network scales gradually.

Same-store growth improved notably only in China; other regions saw limited change. By channel, online grew 13% and continued to accelerate, well ahead of stores.Dolphin Research believes higher online discounting diverted some demand from offline.

V. GPM down visibly

Tariff impacts and the Aug removal of the de minimis threshold lifted supply chain costs. More promotions in outlets and on e-comm (avg. discount 30%-40%) also weighed on mix.GPM fell 290bps YoY to 55.6%, broadly in line with Q2 guidance.

VI. Opex ratio stable

On costs, payroll rose with Intl hiring and supply-chain moves (warehouse upgrades, footprint shifts). However, Q3 org streamlining, including back-office reductions, offset part of the pressure.The opex ratio ticked up 50bps to 38.5%. Core OPM was 17.1%, down 340bps.

Dolphin Research Lululemon archive:

Deep dives:

Mar 12, 2025: LULULEMON: How did a pair of black pants break through?

Apr 10, 2025: Lululemon: Men are unreliable; can overseas save it?

Earnings notes:

Apr 1, 2025: Lululemon: Are the ‘little black pants’ losing their magic? Is the yoga Hermes double-hit?

Jun 6, 2025: Lululemon plunges again? Profits collapsed too fast, multiples too slow!