TLDRs;
- LULU shares trade far below 2025 highs despite a recent rebound.
- Weak U.S. demand and repeated guidance cuts weigh heavily on expectations.
- Tariff impacts will continue pressuring margins through 2026.
- December 11 earnings will significantly shape LULU’s 2026 outlook.
Lululemon Athletica’s stock (NASDAQ: LULU) has struggled through a turbulent 2025, and its latest price action reflects that pressure.
Shares closed near $190 on Thuesday , rising about 3.5% on the day but still trading more than 55% below their 52-week high around $423. The recent rebound has lifted the stock off its lows near $159, yet the overall trend shows a brand navigating one of its toughest years in a decade.
With third-quarter fiscal 2025 earnings set for December 11, investors are reassessing Lululemon’s trajectory as weakening U.S. demand, margin compression, and back-to-back guidance cuts redefine expectations heading into 2026.
Lululemon Athletica Inc., LULU
U.S. Growth Slows Sharply
Lululemon’s North American performance has softened significantly this year. Comparable sales in the region fell roughly 2% in early 2025, a dramatic reversal from the double-digit gains investors once took for granted. Management cited economic pressure, inflation, and consumer pullbacks in discretionary spending as key contributors.
These challenges forced the company to revise its full-year outlook twice. The initial EPS target above $15 was reduced to a range near $12.77–$12.97, marking a clear decline from 2024’s earnings. Revenue growth is projected at only 2–4%, far below the pace that once supported Lululemon’s ambitious “Power of Three ×2” plan.
The slowdown has reset investor expectations around the brand’s growth profile. Instead of a high-multiple premium retailer powering through economic cycles, LULU now trades closer to a value-oriented apparel company, as reflected in its 13x trailing P/E.
Tariffs Apply Heavy Margin Pressure
Beyond demand weakness, trade policy has emerged as one of the biggest headwinds for the company. With a large manufacturing footprint spread across Asia, Lululemon is among the apparel brands most exposed to recent tariff changes and the elimination of the de minimis exemption.
Analysts estimate that tariffs could reduce operating profit by $240 million in fiscal 2025 and as much as $320 million in 2026. The company has responded with selective price increases and sourcing adjustments, but leadership has acknowledged that raising prices too aggressively risks losing customers during an already fragile spending environment.
This tariff burden has translated directly into guidance where gross margin is expected to decline by roughly 300 basis points this year. The financial impact has effectively erased several years of margin expansion and left management with limited room to maneuver.
Institutions Maintain Confidence Despite Volatility
Even with earnings pressure and a harsh 2025 stock slide, institutional investors have not abandoned Lululemon. Major asset managers, including Vanguard, T. Rowe Price, AllianceBernstein, Invesco, and Geode, added to their positions throughout the year. Baird Financial Group delivered the most notable increase, more than doubling its stake to approximately 135,000 shares.
These allocations suggest that long-term investors still view Lululemon as a premium brand with exceptional profitability. The latest quarter showed a 16% net margin and return on equity above 40%, both rare in the retail sector. Many institutional investors interpret the current downturn as cyclical rather than structural.
Still, sentiment has cooled compared to previous years. Analysts argue that a clear path to reaccelerating U.S. sales and improving margins is needed before LULU can reclaim its old valuation premium.
December 11 Earnings Will Define Early 2026
The upcoming third-quarter earnings report may significantly influence Lululemon’s direction heading into 2026. Analysts expect modest 3 to 4% revenue growth but a year-over-year decline in earnings as margins remain under pressure. Still, the real driver will be management’s commentary on next year’s outlook.
Investors want clarity on whether U.S. store traffic is stabilizing, how much international strength can offset domestic weakness, and how effectively the company can manage tariff costs through pricing or sourcing. They’re also watching for signs of increased promotions, shifts in inventory strategy, or any adjustments to long-term revenue targets.
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