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1. Company Snapshot

1.a. Company Description

lululemon athletica inc., together with its subsidiaries, designs, distributes, and retails athletic apparel and accessories for women and men.It operates in two segments, Company-Operated Stores and Direct to Consumer.The company offers pants, shorts, tops, and jackets for healthy lifestyle and athletic activities, such as yoga, running, and training, as well as other sweaty pursuits.


It also provides fitness-related accessories and footwear.The company sells its products through a chain of company-operated stores; outlets and warehouse sales; interactive workout platform; a network of wholesale accounts, such as yoga studios, health clubs, and fitness centers; temporary locations; and license and supply arrangements, as well as directly to consumer through mobile apps and lululemon.com e-commerce website.As of January 30, 2022, it operated 574 company-operated stores under the lululemon brand in the United States, Canada, the People's Republic of China, Australia, the United Kingdom, Japan, New Zealand, Germany, South Korea, Singapore, France, Malaysia, Sweden, Ireland, the Netherlands, Norway, and Switzerland.


lululemon athletica inc.was founded in 1998 and is based in Vancouver, Canada.

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1.b. Last Insights on LULU

Lululemon Athletica's recent momentum is driven by its robust international expansion, particularly in Asia and new European markets, which is mitigating domestic softness. The company's premium brand commands pricing power, supporting high profits. A $1 billion buyback and strong cash position underscore shareholder-friendly actions. Activist involvement and a depressed valuation also contribute to the positive outlook, with some estimates suggesting a 25% upside.

1.c. Company Highlights

2. Lululemon's Q3 Earnings: A Mixed Bag

Lululemon's Q3 financial highlights were marked by a total revenue of $2.6 billion, a 7% increase year-over-year, with comparable sales rising 2%. However, the Americas region saw a 2% decline in revenue, while China Mainland revenue surged 46%. Gross profit for Q3 was $1.43 billion, or 55.6% of net revenue, with a 290 basis point decrease driven by tariff impacts and higher markdowns. The company's diluted EPS was $2.59, beating estimates of $2.22. Operating expenses were $844.9 million, and gross margin was 47.3%.

Publication Date: Dec -20

📋 Highlights
  • 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.

3. NewsRoom

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NIKE vs. lululemon: Which Stock Offers Better Upside Potential?

17:15

Source: zacks.com

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lululemon Announces 100th Store Opening in EMEA

11:30

Source: businesswire.com

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Retail and apparel stocks spike after Supreme Court strikes down President Trump's tariffs

Feb -20

Source: nypost.com

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3 Dirt-Cheap Stocks to Buy With $1,000 Right Now

Feb -19

Source: fool.com

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Lululemon (LULU) Outperforms Broader Market: What You Need to Know

Feb -18

Source: zacks.com

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CROX or LULU: Which Is the Better Value Stock Right Now?

Feb -18

Source: zacks.com

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Prem Watsa's Strategic Moves: Orla Mining Ltd Sees a -13.01% Impact

Feb -17

Source: gurufocus.com

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Illinois Municipal Retirement Fund Purchases 7,619 Shares of lululemon athletica inc. $LULU

Feb -14

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.10%)

6. Segments

Americas

Expected Growth: 6.5%

Slightly higher than global growth due to established brand loyalty and continued expansion through new store openings and online channels, capitalizing on the growing athleisure trend.

China Mainland

Expected Growth: 8.0%

Higher growth is expected due to the expanding customer base, increasing brand awareness, and strategic market expansion plans in mainland China, outpacing the global average growth rate (around 50 words).

Rest of World

Expected Growth: 7.5%

Higher growth anticipated due to expanding customer base, increasing brand awareness, and entry into new markets, potentially outpacing global average growth.

7. Detailed Products

Yoga Pants

Moisture-wicking, four-way stretch pants designed for yoga and running

Running Shorts

Lightweight, breathable shorts designed for running and training

Outerwear

Water-resistant and breathable jackets and hoodies designed for outdoor activities

Tops

Moisture-wicking, breathable tops designed for yoga, running, and training

Accessories

Yoga mats, bags, and accessories designed to complement Lululemon's apparel

Menswear

Technical athletic apparel designed for men, including pants, shorts, and tops

8. Lululemon Athletica Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Lululemon Athletica Inc. has a strong brand image and a loyal customer base, making it difficult for substitutes to gain traction.

Bargaining Power Of Customers

While customers have some bargaining power due to the availability of alternatives, Lululemon's strong brand loyalty and premium pricing strategy mitigate this force.

Bargaining Power Of Suppliers

Lululemon has a diversified supplier base and a strong negotiating position, reducing the bargaining power of its suppliers.

Threat Of New Entrants

While there are barriers to entry in the athletic apparel market, new entrants can still pose a threat to Lululemon's market share, particularly if they offer innovative products or business models.

Intensity Of Rivalry

The athletic apparel market is highly competitive, with established players like Nike and Under Armour, as well as newer entrants, competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 24.90%
Debt Cost 3.95%
Equity Weight 75.10%
Equity Cost 10.47%
WACC 8.85%
Leverage 33.16%

11. Quality Control: Lululemon Athletica Inc. passed 8 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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PulteGroup

A-Score: 5.8/10

Value: 6.0

Growth: 8.8

Quality: 7.7

Yield: 2.0

Momentum: 4.0

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
Booking

A-Score: 5.8/10

Value: 3.6

Growth: 8.7

Quality: 8.0

Yield: 1.0

Momentum: 5.0

Volatility: 8.3

1-Year Total Return ->

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TJX

A-Score: 5.6/10

Value: 1.6

Growth: 6.4

Quality: 5.8

Yield: 2.0

Momentum: 8.0

Volatility: 10.0

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Ross Stores

A-Score: 5.5/10

Value: 2.2

Growth: 5.9

Quality: 6.5

Yield: 2.0

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

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Lennar

A-Score: 4.8/10

Value: 6.8

Growth: 4.3

Quality: 5.9

Yield: 3.0

Momentum: 2.5

Volatility: 6.3

1-Year Total Return ->

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Lululemon

A-Score: 4.5/10

Value: 4.9

Growth: 8.9

Quality: 7.8

Yield: 0.0

Momentum: 1.0

Volatility: 4.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

177.75$

Current Price

177.75$

Potential

-0.00%

Expected Cash-Flows