- Leadership Transition: CEO Calvin McDonald departs after 7 years, succeeded by co-CEOs Meghan Frank and Andre Maestrini, with Marti Morfitt as Executive Chair.
- Global Revenue Shift: Q3 international revenue rose 33% (led by 46% China growth), while Americas revenue fell 2% (U.S. -3%, Canada -1%).
- Financial Performance: Q3 total revenue hit $2.24 billion, with $2.41 diluted EPS and 47.3% gross margin, but 2% comparable sales decline.
- Inventory & Cash Flow: Inventory grew 11% to $2 billion; $1.6 billion share repurchase capacity remains, with no debt and $1 billion in cash.
- Full-Year Guidance: 2025 revenue projected at $10.96B–$11.05B (4% growth), with gross margin expected to drop ~270 basis points due to tariffs.
Regional Performance
The company's regional performance was mixed, with the Americas region experiencing a decline in revenue, while China Mainland continued to show strong growth. The U.S. market saw a 3% decline in revenue, while Canada was down 1%. International revenue, however, increased 33%, driven by the 46% growth in China Mainland. The company's e-commerce performance in China was particularly strong, contributing to the overall growth.
Guidance and Outlook
Lululemon updated its guidance outlook for the full year 2025, expecting revenue to be in the range of $10.96 billion to $11.05 billion, representing growth of 4%. Gross margin is expected to decrease approximately 270 basis points versus 2024. The company expects to open approximately 46 net new company-operated stores this year and complete around 36 optimizations. For Q4, the company expects revenue in the range of $3.5 billion to $3.59 billion, representing a decline of 3% to 1% relative to 2024.
Valuation and Growth Prospects
With a P/E Ratio of 14.26 and an ROE of 39.22%, Lululemon's valuation appears reasonable, considering its growth prospects. Analysts estimate next year's revenue growth at 4.6%. The company's strong cash flow generation and healthy balance sheet, with $1 billion in cash and no debt, provide a solid foundation for future growth. The P/S Ratio of 2.12 also indicates a relatively reasonable valuation. The company's focus on product innovation, enterprise efficiency, and strategic growth initiatives should help drive future growth.
Leadership Change and Strategy
The leadership change, with Calvin McDonald stepping down and Marti Morfitt taking over as Executive Chair, along with co-CEOs Meghan Frank and Andre Maestrini, is expected to drive the company's growth strategy. The company's product innovation pipeline includes solutions to unmet needs, with a focus on performance activity categories and updates to core franchises. The team is confident in the work done over the past year, and new products have driven outsized growth.