Lululemon’s fourth quarter saw management address persistent challenges in its core North American market, with particular focus on restoring full-price sales and managing the impact of higher tariffs. Interim Co-CEO and CFO Meghan Frank pointed to new product launches such as Unrestricted Power and ThermoZen as drivers of “great green shoots,” but acknowledged that markdowns and tariff headwinds continued to weigh on margins. Interim Co-CEO Andre Maestrini emphasized the importance of enhancing guest experience both in stores and online, stating, “We are evolving the experience to better reflect the premium positioning of the lululemon brand.” Despite international strength, the market responded negatively, reflecting investor concern over flat overall sales and significant operating margin compression.
Is now the time to buy LULU? Find out in our full research report (it’s free for active Edge members).
Lululemon (LULU) Q4 CY2025 Highlights:
- Revenue: $3.64 billion vs analyst estimates of $3.57 billion (flat year on year, 1.8% beat)
- EPS (GAAP): $5.01 vs analyst estimates of $4.78 (4.8% beat)
- Adjusted EBITDA: $946.8 million vs analyst estimates of $934.1 million (26% margin, 1.4% beat)
- Revenue Guidance for Q1 CY2026 is $2.42 billion at the midpoint, below analyst estimates of $2.47 billion
- EPS (GAAP) guidance for the upcoming financial year 2026 is $12.20 at the midpoint, missing analyst estimates by 2.8%
- Operating Margin: 22.3%, down from 28.9% in the same quarter last year
- Locations: 811 at quarter end, up from 767 in the same quarter last year
- Same-Store Sales rose 3% year on year, in line with the same quarter last year
- Market Capitalization: $19 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Lululemon’s Q4 Earnings Call
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Brooke Roach (Goldman Sachs): Asked when North American growth would inflect, and CEO Meghan Frank explained improvement should be evident in Q2, with a return to positive growth in the second half of the year.
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Lorraine Hutchinson (Bank of America): Inquired about marketing strategy changes. Frank confirmed a shift towards influencer-led campaigns and more impactful guest activations, especially in underpenetrated markets.
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Adrienne Yih (Barclays): Questioned the composition of newness and SKU reduction. Frank clarified that the 35% newness target is focused on genuinely new products and that SKU reduction is underway to highlight these offerings.
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Matthew Boss (JPMorgan): Sought more detail on margin contraction. Frank attributed the decline mainly to added labor and incentive compensation, as well as proxy contest expenses, with tariffs as a secondary factor.
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Paul Lejuez (Citi Research): Asked about full-price trends in China and Rest of World. Frank and Maestrini both confirmed no similar markdown pressures abroad and noted that the international playbook is focused on premium positioning and minimal discounting.
Catalysts in Upcoming Quarters
In the coming quarters, our team will be watching (1) evidence of improving full-price sales and traffic in North America, (2) the company’s ability to offset margin pressures from tariffs and rising operating costs, and (3) continued international momentum—especially in China and Europe. The effectiveness of new product launches and the impact of digital and in-store experience upgrades will also serve as key indicators of progress.
Lululemon currently trades at $165.45, up from $159.27 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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