TLDRs:
- Lululemon posts strong Q3 results, international growth offsets U.S. weakness.
- CEO Calvin McDonald steps down; interim leadership takes charge.
- $1B buyback expansion signals confidence and supports earnings per share.
- Analysts raise price targets while keeping mostly neutral ratings.
Lululemon athletica inc. (NASDAQ: LULU) soared in early trading Friday following a better-than-expected fiscal Q3 2025 earnings report, a $1 billion expansion of its stock buyback program, and an announced CEO succession plan. Investors reacted positively, with LULU shares climbing roughly 9–10% in after-hours and premarket trading.
The combination of strong financial results and leadership clarity has reinvigorated confidence in the brand, which has faced challenges in the Americas market while seeing international growth accelerate.
Lululemon Athletica Inc., LULU
Q3 Earnings Beat Expectations
Lululemon reported net revenue of $2.6 billion, a 7% year-over-year increase. While revenue in the Americas fell by 2%, international markets surged 33%, driving the overall top-line performance. Comparable sales rose 1% overall, with international comps up 18%, offsetting a 5% decline in the Americas.
Profitability, however, faced pressure. Gross margins declined 290 basis points to 55.6%, and operating margins decreased 350 basis points to 17.0%. Net income came in at $306.8 million, slightly below the previous year’s $351.9 million, while diluted EPS was $2.59, down from $2.87. Despite these headwinds, analysts viewed the results as a sign of stabilization following a difficult year for the stock.
CEO Transition Sparks Market Interest
Lululemon announced that CEO Calvin McDonald will step down effective January 31, 2026, with board chair Marti Morfitt stepping in as executive chair immediately. CFO Meghan Frank and Chief Commercial Officer André Maestrini will serve as interim co-CEOs while the board conducts a comprehensive search for a permanent successor.
Investors often respond positively to leadership transitions when a “reset” is expected. In Lululemon’s case, market watchers are focusing on how this change could address softness in the U.S. market and enhance merchandising execution. McDonald will remain involved as a senior advisor through March 31, 2026, providing continuity during the transition.
$1 Billion Buyback Boosts Investor Confidence
The board of directors approved a $1 billion expansion of the share repurchase program, bringing remaining authorization to approximately $1.6 billion. Stock buybacks often support earnings per share and are viewed by the market as a signal of confidence from management, especially following a period of underperformance.
Lululemon ended the quarter with $1 billion in cash and $2 billion in inventory, up 11% year-over-year. Analysts are watching whether elevated inventory levels could lead to higher discounting, potentially affecting margins in upcoming quarters.
Analysts Adjust Ratings and Targets
Following the earnings announcement, several analysts adjusted their outlooks on Lululemon stock, with most maintaining neutral or hold ratings despite raising price targets. Jefferies upgraded its rating to Hold and increased its target from $120 to $170, while Truist Securities raised its target from $170 to $200.
Stifel followed suit, lifting its price target from $205 to $210, and BofA Securities increased its target from $185 to $220. The combination of stronger-than-expected earnings, the expanded buyback program, and clarity around the upcoming leadership transition provided analysts with updated inputs for their valuation models, effectively resetting market expectations for Lululemon as it moves into 2026.
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