Published December 11, 2025
Lululemon Athletica (NASDAQ: LULU) reported fiscal third‑quarter 2025 results after the bell on Thursday that comfortably topped Wall Street estimates on both revenue and earnings — even as profits fell year over year and the company warned that tariffs and a soft U.S. consumer will continue to squeeze margins. At the same time, the yoga‑wear giant unveiled a CEO succession plan that will see Calvin McDonald step down in early 2026 and the board expand its share repurchase authorization by another $1 billion. [1]
Q3 2025 results at a glance
For the quarter ended November 2, 2025 (Lululemon’s fiscal Q3 2025), the company reported: [2]
- Net revenue: about $2.57–$2.6 billion, up 7% from a year ago
- Comparable sales: +1% overall (or +2% in constant currency)
- Diluted EPS: $2.59, down from $2.87 a year earlier
- Net income: roughly $307 million, versus $352 million in the prior‑year quarter
- Gross margin: 55.6%, down 290 basis points year over year
- Operating margin: 17.0%, down 350 basis points
- Store base: 796 company‑operated stores, after opening 12 net new locations in the quarter
Wall Street had been looking for around $2.48–$2.49 billion in revenue and EPS of roughly $2.21–$2.22 per share. Lululemon beat on both lines: EPS exceeded consensus by about $0.38, while revenue came in roughly $100–$120 million ahead of forecasts. [3]
Americas softness vs. surging international growth
The headline growth masks a stark split between Lululemon’s home market and the rest of the world. [4]
- Americas net revenue fell 2%, and comparable sales in the region dropped 5% year over year.
- International net revenue jumped 33%, with comparable sales up 18%, continuing strong momentum in markets like Mainland China and other international regions.
Management has been open for several quarters that the U.S. business is under pressure from weaker discretionary spending, particularly in women’s categories, and from heavy competition in premium athleisure. Pre‑earnings analysis from Zacks flagged ongoing North American softness as a key risk this quarter, noting that a meaningful recovery in the Americas is not expected until 2026. [5]
That prediction largely played out: the U.S. remains Lululemon’s problem child, while international growth continues to carry the top line.
Margins squeezed by tariffs and costs — but better than feared
Despite the revenue beat, profitability is going the wrong way. Gross margin fell from 58.5% to 55.6%, while operating margin shrank from 20.5% to 17.0%. Income from operations dropped 11% even as sales grew. [6]
Several headwinds are converging:
- Tariffs and the loss of the U.S. “de minimis” exemption on small imports are hitting product costs and shipping.
- Higher markdowns and clearance activity are weighing on pricing power.
- Ongoing investments in distribution centers, technology, and marketing add to SG&A pressure.
Ahead of the print, Zacks estimated that gross margin could contract by about 410 basis points, with a 230‑bps hit from tariffs alone and additional drag from fixed‑cost deleverage and higher markdowns. [7]
The actual gross margin decline of 290 bps is still painful but better than those worst‑case expectations, suggesting Lululemon has managed to offset some of the cost shock through mix, pricing, and efficiencies.
Inventories grew 11% to $2.0 billion, though only 4% on a unit basis — a sign that higher costs and mix are part of the story, not just an inventory glut. [8]
Holiday‑quarter guidance: solid sales, pressured profits
Investors were laser‑focused on Lululemon’s outlook for the key holiday quarter and the full fiscal year.
For Q4 2025, Lululemon now expects: [9]
- Net revenue:$3.50–$3.585 billion
- This implies a 3% to 1% reported decline year over year, or 2%–4% growth when adjusting for the extra 53rd week in fiscal 2024.
- Diluted EPS:$4.66–$4.76
- Wall Street was looking for roughly $4.97 per share.
For the full 2025 fiscal year (ending February 1, 2026), management now guides to: [10]
- Net revenue: $10.962–$11.047 billion, about 4% growth on a reported basis, or 5%–6% growth excluding last year’s extra week.
- EPS: $12.92–$13.02, modestly below a FactSet consensus around $13.13.
The company reiterated that its 2025 outlook already bakes in an estimated $210 million reduction in income from operations tied to higher tariffs and the removal of the de minimis exemption, even after planned mitigation such as vendor savings and pricing actions. [11]
In short: sales are holding up better than sentiment, but margins are under sustained pressure — and guidance admits that reality.
CEO Calvin McDonald to step down after seven years
In a separate release, Lululemon announced that Calvin McDonald will step down as CEO and leave the board effective January 31, 2026, after roughly seven years in the top job. [12]
Key points from the succession plan:
- The board has launched a comprehensive CEO search with an external executive search firm.
- Marti Morfitt, currently Chair of the Board, becomes Executive Chair, effective immediately.
- CFO Meghan Frank and Chief Commercial Officer André Maestrini will serve as interim co‑CEOs following McDonald’s transition.
- McDonald will remain on as a senior adviser through March 31, 2026 to support the handover. [13]
Reuters and other outlets framed the move as coming after a period of slowing sales, repeated forecast cuts and a steep share‑price decline in 2025, particularly tied to weak U.S. demand and tariff‑driven margin compression. [14]
The leadership change follows other executive churn, including the planned departure of Celeste Burgoyne, President of the Americas and Global Guest Innovation, and earlier exits such as former Chief Product Officer Sun Choe — factors that some analysts argue complicate any North American turnaround. [15]
Massive buyback boost: $1.6 billion still authorized
To reassure investors and signal confidence, Lululemon’s board approved a $1.0 billion increase to its share repurchase program. [16]
- During Q3, the company repurchased 1.0 million shares for $189 million.
- After the new authorization, Lululemon has about $1.6 billion remaining under its buyback program.
- The balance sheet remains solid, with roughly $1.0 billion in cash and cash equivalents and $593 million in available revolving credit capacity at quarter end. [17]
With the stock down more than 50% in 2025 and trading well below its 52‑week high, buybacks at current levels could be meaningfully accretive to EPS if the business stabilizes. [18]
How the market and options traders were positioned
Heading into the report, the setup around LULU stock was tense:
- Shares had lost over half their value this year and were among the worst performers in the S&P 500, according to recent commentary on Nasdaq and Stocktwits. [19]
- Zacks highlighted that at around $190 per share earlier this week, Lululemon traded about 19% above its 52‑week low and a steep 55% below its 52‑week high near $423, with a forward P/E near 14.6x, below the broader industry and S&P 500 averages. [20]
- Options data cited by TipRanks suggested traders were bracing for roughly a 12% move in either direction on the earnings release. [21]
In the immediate aftermath of the report, early coverage from outlets like Yahoo Finance noted that LULU shares traded higher in extended hours, reflecting relief over the revenue and EPS beat and optimism around international growth and the enlarged buyback — even as investors digested the CEO transition and cautious guidance. [22]
What analysts expected today — and what Lululemon delivered
Pre‑earnings previews painted a picture of a high‑quality brand wrestling with serious macro and company‑specific challenges:
- Consensus forecasts called for EPS around $2.21–$2.22, down more than 20% year over year, on 3–4% revenue growth to about $2.48–$2.49 billion. [23]
- Zacks and other analysts warned of gross margin compression of roughly 4 percentage points, driven by tariffs on China and Mexico, the elimination of the de minimis exemption on small packages, and higher markdowns. [24]
- Several notes highlighted continued weakness in the Americas and stronger momentum in international markets, particularly China, as key themes to watch. [25]
Against that backdrop, Lululemon outperformed on the top and bottom lines and delivered less‑severe margin pressure than feared, but it did not fully soothe concerns about profitability or the U.S. consumer:
- EPS beat consensus by ~17%, but still fell nearly 10% year over year. [26]
- Revenue grew faster than expected, powered by international sales, while the Americas contracted. [27]
- Q4 and full‑year EPS guidance came in below Wall Street estimates, confirming that tariffs and cost pressures will continue into 2026. [28]
Founder and market critics: innovation, identity and “loss of cool”
Today’s results land in the middle of an intense debate about what, exactly, has gone wrong at Lululemon in 2025.
- In a widely shared Motley Fool piece this week, founder Chip Wilson argued that Lululemon “isn’t nearly as innovative as it needs to be” and suggested the company has become too finance‑driven and risk‑averse on product, undermining its ability to attract creative talent and set trends. [29]
- A Stocktwits deep‑dive today highlighted market share losses in Lululemon’s direct‑to‑consumer channel, with its share dropping from about 30% in January to 24% in November, while rivals like Alo Yoga gained ground. [30]
- That piece also noted that Lululemon plans to increase the proportion of new styles in its assortment from 23% to roughly 35% by next spring, with management expecting the impact of these product initiatives to show up mainly in 2026, not this holiday season. [31]
Layer on top the tariff shock, executive exits, and now a pending CEO change, and it’s clear why many analysts have moved to more cautious or neutral stances ahead of today’s report — even as some value‑minded investors argue the stock’s compressed valuation already discounts much of the bad news. [32]
What today’s earnings mean for LULU stock
For investors and observers, three big takeaways stand out from Lululemon’s Q3 2025 earnings and leadership news:
- The brand still has global momentum.
International growth of more than 30% shows Lululemon continues to resonate strongly outside North America. The global athleisure opportunity is intact, and the company’s balance sheet and cash generation give it plenty of firepower to invest. [33] - Margins and the U.S. recovery remain the swing factors.
Tariffs, the de minimis change, and a cautious U.S. consumer are compressing profitability, and management doesn’t expect full relief until at least 2026. The key question over the next few quarters is whether Lululemon can regain product “newness” in North America without sacrificing pricing power or resorting to aggressive discounting. [34] - Leadership transition adds uncertainty — and opportunity.
McDonald’s exit caps a tumultuous year that saw the stock more than halve from its highs and the company cut its outlook multiple times. A successful CEO search that balances financial discipline with renewed creative energy could mark a turning point; a misstep could deepen concerns about culture, innovation and execution. [35]
For now, the market appears cautiously optimistic: earnings and revenue are better than feared, the buyback is bigger, and the international story is robust — but guidance, tariffs and leadership change ensure that Lululemon’s path back to premium‑growth darling status will not be an easy one.
This article is for informational purposes only and does not constitute investment advice. Investors should do their own research or consult a licensed financial advisor before making investment decisions.
References
1. corporate.lululemon.com, 2. corporate.lululemon.com, 3. www.investing.com, 4. corporate.lululemon.com, 5. www.nasdaq.com, 6. corporate.lululemon.com, 7. www.nasdaq.com, 8. corporate.lululemon.com, 9. corporate.lululemon.com, 10. corporate.lululemon.com, 11. corporate.lululemon.com, 12. corporate.lululemon.com, 13. corporate.lululemon.com, 14. www.reuters.com, 15. corporate.lululemon.com, 16. corporate.lululemon.com, 17. corporate.lululemon.com, 18. stocktwits.com, 19. www.nasdaq.com, 20. www.nasdaq.com, 21. www.tipranks.com, 22. finance.yahoo.com, 23. www.nasdaq.com, 24. www.nasdaq.com, 25. www.nasdaq.com, 26. corporate.lululemon.com, 27. corporate.lululemon.com, 28. www.investing.com, 29. www.nasdaq.com, 30. stocktwits.com, 31. stocktwits.com, 32. seekingalpha.com, 33. corporate.lululemon.com, 34. corporate.lululemon.com, 35. corporate.lululemon.com
