Lululemon Reports Mixed Q4 Results, Issues Weak FY26 Guidance with Projected EPS Decline
Summary
Lululemon reported Q4 results slightly above expectations but full-year 2025 diluted EPS declined. The company issued weak fiscal 2026 guidance, projecting a further decline in full-year EPS and modest revenue growth, signaling significant headwinds.
Key Events
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Q4 2025 Financial Results
Net revenue increased 1% to $3.6 billion, while diluted EPS decreased to $5.01 from $6.14 in Q4 2024. Gross profit decreased 8%, with gross margin down 550 basis points to 54.9%.
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Full Year 2025 Financial Results
Net revenue increased 5% to $11.1 billion, but diluted EPS fell to $13.26 from $14.64 in 2024. Gross margin decreased 260 basis points to 56.6%.
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Weak Fiscal 2026 Guidance
The company expects full-year 2026 net revenue of $11.35 billion to $11.50 billion (2-4% growth) and diluted EPS of $12.10 to $12.30, representing a decline from fiscal 2025.
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Regional Performance Divergence
Americas net revenue decreased 4% in Q4 and 1% for the full year, while International net revenue increased 17% in Q4 and 22% for the full year.
Analysis
Lululemon's latest earnings report presents a mixed picture, with fourth-quarter revenue and EPS slightly ahead of internal expectations, but full-year 2025 results showing a decline in diluted EPS and gross margins compared to the prior year. The most significant takeaway is the weak fiscal 2026 guidance, which projects revenue growth of only 2-4% and a notable decline in diluted earnings per share to $12.10-$12.30 from $13.26 in fiscal 2025. This guidance signals a significant slowdown in growth and profitability, particularly concerning given the company's premium valuation and its current position trading near its 52-week low. The challenges in North America, where revenue decreased, contrast sharply with strong international growth. The 18% increase in inventory also raises concerns about potential future margin pressure. This weak outlook could further fuel the ongoing proxy fight initiated by founder Chip Wilson, as previously disclosed in DFAN14A filings earlier this month, by providing additional arguments for his campaign.
At the time of this filing, LULU was trading at $155.50 on NASDAQ in the Manufacturing sector, with a market capitalization of approximately $19.5B. The 52-week trading range was $156.64 to $348.50. This filing was assessed with negative market sentiment and an importance score of 8 out of 10.