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    Lululemon Athletica Inc (LULU)

    Business Description

    Lululemon Athletica Inc. is a company engaged in the design, distribution, and retail of technical athletic apparel, footwear, and accessories. They sell performance apparel such as pants, shorts, tops, and jackets designed for activities like yoga, running, and training, as well as fitness-inspired accessories . The company markets these products under the lululemon brand and employs a vertical retail approach to gather customer feedback and incorporate it into product design, differentiating them from competitors . Lululemon operates through various channels, including company-operated stores, e-commerce, outlets, and wholesale arrangements, with a significant portion of its revenue generated from physical retail locations .

    1. Women's Product Range - Offers a wide variety of performance apparel tailored for women, including yoga pants, running shorts, and training tops.
    2. Men's Product Range - Provides performance apparel for men, featuring items like athletic shorts, tops, and jackets designed for various physical activities.
    3. Other Product Categories - Includes fitness-inspired accessories and footwear, expanding the brand's offerings beyond apparel.

    Q3 2025 Summary

    Initial Price$228.08August 3, 2024
    Final Price$321.17November 3, 2024
    Price Change$93.09
    % Change+40.81%

    What went well

    • Lululemon's China Mainland revenue grew 36% in Q3 on a constant currency basis, with healthy operating margin expansion, and the company expects above 30% growth in Q4, highlighting strong performance and long-term growth potential in the region.
    • The company plans to expand into new international markets, including opening an own market in Italy and franchising in Denmark, Belgium, Turkey, and the Czech Republic, reflecting confidence in the brand's global momentum and strong performance in every international market.
    • Strong guest retention with a membership base of 24 million in North America, providing opportunities to increase revenue per guest through product newness, and unaided brand awareness in the U.S. has increased to 36%, indicating significant potential for growth in the U.S. market.

    What went wrong

    • Revenues are lower than expected, and operating margin is being maintained primarily through expense management rather than revenue growth.
    • U.S. store traffic was slightly lower than last year, indicating weakness in brick-and-mortar performance in the U.S. market.
    • Marketing expenses are expected to increase to approximately 5.5% of sales due to top-line pressure, suggesting higher costs to drive sales.

    Q&A Summary

    1. U.S. Sales Outlook
      Q: When will U.S. comps turn positive?
      A: Management is confident that U.S. comparable sales will inflect positively by Q1 2025, driven by increased "newness" in product offerings returning to historical levels. Guests remain engaged and loyal, responding well to new products despite current negative comps.

    2. Gross Margin Expectations
      Q: How sustainable are gross margin drivers into Q4?
      A: Gross margin benefited by 50 basis points in Q3 from lower inventory provisions and higher initial markups. For Q4, they're expecting a 50–60 basis point product margin benefit, partially offset by fixed cost deleverage due to store growth amid lower revenue trends.

    3. China Growth and Margins
      Q: How is China performing financially?
      A: China Mainland achieved 36% growth in Q3 on a constant currency basis. Healthy operating margin expansion is reported, with expectations of over 30% growth again in Q4. Management sees long-term opportunity despite not currently optimizing margins.

    4. Product Newness Strategy
      Q: How will product "newness" change in 2025?
      A: By Q1 2025, product "newness" will return to historical levels, enhancing guest engagement. This includes more colors, patterns, and innovative items within core franchises. Recent new products are performing well, boosting confidence in this strategy.

    5. Inventory Management
      Q: What's driving mid-teens inventory growth in Q4?
      A: Inventory is expected to grow in the mid-teens in Q4, up from +8% in Q3, due to chasing seasonal newness and setting up for H1 2025. Inventory turns are slightly slower than history but align with sales growth plans.

    6. Potential Tariff Impact
      Q: How could tariffs affect costs next year?
      A: Exposure to potential tariffs is limited, as only 3% of goods are sourced from China. Sourcing from Mexico is less than half a percent, and none from Canada. Widespread tariffs on all imports would have a more significant cost impact.

    7. Marketing Spend
      Q: How is marketing investment changing?
      A: Marketing spend is increasing to 5.5% of sales this year, up from the usual 4.5–5%. Investments focus on community events, ambassador relationships, and top-of-funnel initiatives, driving unaided brand awareness in the U.S. to 36%.

    8. International Expansion Plans
      Q: What are the plans for new markets?
      A: In 2025, Lululemon plans to open owned stores in Italy and franchise stores in Denmark, Belgium, Turkey, and the Czech Republic. This expansion is driven by strong brand momentum globally and demand in new markets.

    9. Traffic Trends and Customer Acquisition
      Q: How are traffic and customer acquisition progressing?
      A: Global traffic is positive across both channels. In the U.S., e-commerce traffic remains positive while stores are slightly lower. The membership base in North America has grown to over 24 million, enhancing guest engagement and retention.

    10. Competitive Landscape and Promotions
      Q: How is the promotional environment affecting you?
      A: Despite a heavily promotional period, Lululemon maintains a non-promotional, regular price business, unlike others in the space. Management is pleased with results, indicating strong brand resonance and guest response to products during the holiday season.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025Q2 2025Q3 2025
    Women's Product1,308.81,396.31,433.932,008.376,147.41,435.21,476.11,555.686
    Men's Product438.2530.7504.83779.072,252.8505.7587.5551.430
    Other Categories253.8282.1265.46417.841,219.2268.0307.4289.544
    Company-operated Stores958.11,096.91,073.971,282.034,411.01,070.51,215.61,210.523
    Direct to Consumer--------
    Other--------
    E-commerce834.9893.7908.131,674.374,311.1905.8910.6944.777
    Other Channels207.8218.6222.12248.68897.2232.6244.8241.360
    Total Revenue2,000.82,209.22,204.223,205.089,619.32,208.92,371.12,396.660
    Revenue by Geography - in Millions of USDFY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025Q2 2025Q3 2025
    Americas----7,631.6471,622.31,741.431,770.4
    - United States1,314.3911,424.9261,423.572,183.516,346.3921,340.41,421.981,424.2
    - Canada253.347294.847308.82428.241,285.255281.9319.45335.5
    China Mainland----963.760303.8314.19318.3
    - Hong Kong SAR, Taiwan, and Macau SAR----170.53342.342.0441.1
    Rest of World183.369211.892204.93423.681,023.871282.8315.46307.9
    - Other geographic areas----853.338240.6273.42266.9
    People's Republic of China249.685277.500266.89340.221,134.293346.1356.22-
    Outside of North America--------
    Total Revenue2,000.7922,209.1652,204.223,205.19,619.2782,208.92,371.082,396.7
    KPIs - Metric / QuarterFY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024Q4 2024FY 2024Q1 2025Q2 2025Q3 2025
    Products Manufactured by Top Vendors (%)56%56%56%55%-55%55%-
    Fabrics Produced by Top Suppliers (%)56%56%56%--52%52%-

    Executive Team

    NamePositionStart DateShort Bio
    Calvin McDonaldChief Executive OfficerAugust 2018Calvin McDonald has been the CEO of Lululemon since August 2018. Previously, he was the president and CEO of Sephora Americas and Sears Canada. He spent 17 years at Loblaw Companies Limited. He holds an MBA from the University of Toronto and a Bachelor of Science degree from the University of Western Ontario .
    Meghan FrankChief Financial OfficerNovember 2020Meghan Frank has served as the CFO of Lululemon since November 2020. She joined the company in 2016 and held senior finance roles at Ross Stores and J. Crew. She earned her Bachelor of Arts degree from Colgate University .
    Celeste BurgoynePresident, Americas and Global Guest InnovationOctober 2020Celeste Burgoyne has been with Lululemon since 2006 and was appointed as President, Americas and Global Guest Innovation in October 2020. She led the U.S. expansion and oversees guest-facing aspects of the North America business. She holds a B.A. from the University of San Diego .
    Michelle (Sun) ChoeChief Product OfficerSeptember 2018Michelle (Sun) Choe has served as the Chief Product Officer since September 2018. She joined Lululemon in 2016 and previously worked at Marc Jacobs, West Elm, Madewell, and Urban Outfitters. She holds a B.A. from the University of Maryland College Park .
    André MaestriniExecutive Vice President, InternationalJanuary 2021André Maestrini has served as the EVP, International since January 2021. He leads international expansion efforts and previously worked at Adidas, The Coca-Cola Company, Danone, and Kraft Jacobs Suchard. He holds a master’s degree in Marketing from ESSEC Business School in Paris, France .
    Nicole (Nikki) NeuburgerChief Brand OfficerJanuary 2020Nikki Neuburger has served as the Chief Brand Officer since January 2020. She leads marketing, sustainable business, and social impact teams globally. Previously, she was the global head of marketing at Uber Eats and spent 14 years at Nike. She holds a Bachelor of Science in Business Administration from Oregon State University .
    Elizabeth BinderChief Merchandising OfficerN/AThe documents do not provide specific information about Elizabeth Binder's start date or a detailed biography. She is the Chief Merchandising Officer and reports to Nikki Neuburger .

    Questions to Ask Management

    1. Given that U.S. revenue was flat in Q3, consistent with Q2, what specific strategies are you implementing to drive growth in the U.S. market, and when do you anticipate seeing meaningful improvements?
    2. With inventory expected to grow in the mid-teens percentage in Q4, how are you managing the risk of elevated inventory levels impacting margins, especially considering the dynamic macro environment?
    3. Can you elaborate on the efficiencies and benefits you're seeing from the new reporting structure within your product team, and how it's contributing to the increase in seasonal newness by Q1 2025?
    4. Your unaided brand awareness in the U.S. remains low at 36%; what key initiatives are you pursuing to improve brand recognition, and how do you expect this to influence your revenue per guest?
    5. As you increase your marketing spend closer to 5.5% of sales, how are you evaluating the return on investment from these initiatives, particularly in re-engaging lapsed customers in the U.S.?

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateMarch 23, 2022 November 29, 2023
    End Date/DurationCompleted in Q1 2024 No time limit
    Total additional amount$1.0 billion $1.0 billion
    Remaining authorizationN/A (Program completed)$900.1 million
    DetailsProgram completed $1.0 billion increase on May 29, 2024

    Past Guidance

    Q3 2025 Earnings Call

    • Issued Period: Q3 2025
    • Guided Period: Q4 2025 and FY 2024
    • Guidance:
      • Full Year 2024 Guidance:
        • Revenue: $10.452 billion to $10.487 billion, growth of 9% relative to 2023.
        • Gross Margin: Increase by 10 to 20 basis points.
        • SG&A: Increase by 20 to 30 basis points.
        • Operating Margin: Decrease by 10 to 20 basis points.
        • Effective Tax Rate: Approximately 30%.
        • Diluted EPS: $14.08 to $14.16.
        • Capital Expenditures: $670 million to $690 million.
        • Inventory: Increase in the mid-teens in Q4.
        • Store Openings: Approximately 40 net new stores.
      • Q4 2024 Guidance:
        • Revenue: $3.475 billion to $3.51 billion, growth of 8% to 10%.
        • Gross Margin: Decrease by 20 to 30 basis points.
        • SG&A: Deleverage by 90 to 100 basis points.
        • Operating Margin: Deleverage by 110 to 130 basis points.
        • EPS: $5.56 to $5.64.
        • Effective Tax Rate: Approximately 29.5%.
        • Store Openings: 18 net new stores, including 2 in Mexico .

    Q2 2025 Earnings Call

    • Issued Period: Q2 2025
    • Guided Period: Q3 2024 and FY 2024
    • Guidance:
      • Revenue: $10.375 billion to $10.475 billion, growth of 8% to 9%.
      • Store Openings: 35 to 40 net new stores.
      • Gross Margin: Approximately 20 basis points below 2023.
      • SG&A: Approximately flat versus 2023.
      • Operating Margin: Decrease by 10 to 20 basis points.
      • Effective Tax Rate: Approximately 30%.
      • EPS: $13.95 to $14.15.
      • Inventory: Increase in the mid-teens in Q3.
      • Capital Expenditures: $670 million to $690 million .

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: FY 2024
    • Guidance:
      • Diluted EPS: $14.27 to $14.47.
      • Revenue: $10.7 billion to $10.8 billion, growth of 11% to 12%.
      • Gross Margin: Flat with 2023.
      • SG&A Rate: Leverage by 10 basis points.
      • Operating Margin: Increase by 10 basis points.
      • Effective Tax Rate: Approximately 30%.
      • Capital Expenditures: $670 million to $690 million.
      • Inventory: Decline in mid-teens in Q2, increase in second half.
      • Store Openings: 35 to 40 net new stores.
      • Markdowns: Relatively flat for the year .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      • Revenue: $10.7 billion to $10.8 billion, growth of 11% to 12%.
      • EPS: $14 to $14.20.
      • Operating Margin: Increase by 10 basis points.
      • Gross Margin: Flat with 2023.
      • SG&A: Leverage by 10 basis points.
      • Effective Tax Rate: Approximately 30%.
      • Capital Expenditures: $670 million to $690 million.
      • Store Openings: 35 to 40 net new stores.
      • Inventory: Decline in high single to low double-digit percent in first half, increase in second half .

    Latest news

    Recent developments and announcements about LULU.

    Financial Reporting

      Earnings Report

      ·
      Dec 5, 2024, 9:37 PM

      Lululemon Athletica Inc. has released its financial results for the third quarter of fiscal 2024, which ended on October 27, 2024. Here are the key highlights from the earnings report:

      • Revenue: The company reported a 9% increase in net revenue, reaching $2.4 billion. On a constant dollar basis, the increase was 8% .
      • Comparable Sales: Overall comparable sales increased by 4%, or 3% on a constant dollar basis. Notably, international comparable sales surged by 25%, or 22% on a constant dollar basis, while Americas comparable sales decreased by 2% .
      • Profitability: Gross profit rose by 12% to $1.4 billion, with a gross margin increase of 150 basis points to 58.5%. Income from operations saw a significant increase of 45% to $490.7 million, and the operating margin improved by 520 basis points to 20.5% .
      • Earnings Per Share: Diluted earnings per share were reported at $2.87, compared to $1.96 in the same quarter of the previous year .
      • Store Expansion: The company added 28 new company-operated stores during the quarter, including 14 from the acquisition of its Mexico operations, bringing the total to 749 stores .
      • Stock Repurchase Program: The board of directors authorized a $1.0 billion increase in the stock repurchase program, with approximately $1.8 billion remaining authorized as of December 5, 2024 .

      These results reflect Lululemon's strong performance, particularly in international markets, and its strategic focus on expanding its store footprint and enhancing shareholder value through stock repurchases.