Lululemon Athletica’s fourth-quarter fiscal 2025 results landed Tuesday evening in a way that was characteristic of where the company finds itself: better than feared on the top line, but shadowed by guidance that made clear the recovery still has a long road ahead. Shares slipped modestly in premarket trading Wednesday before stabilizing, a reaction that reflected the ambivalence investors are feeling about a brand that remains genuinely strong in some markets and genuinely troubled in others.
Revenue for the quarter came in at $3.64 billion, ahead of analyst estimates of $3.576 billion, while diluted earnings per share of $5.01 topped expectations of $4.74. International momentum delivered much of the outperformance, with China Mainland comparable sales up 30% in Q4 and full-year international revenue growing 22%. That geographic engine is increasingly carrying weight that the North American Business simply isn’t generating.
The Americas region, which remains the company’s largest market, saw net revenue decline 4% in Q4 on a constant currency basis, continuing a streak of negative comparable sales that has now stretched for roughly two years. The company expects Americas sales to decline between 1% and 3% in fiscal 2026, a projection that does little to settle concerns about the depth and duration of the North American slump.
Full-year guidance is where the conversation gets uncomfortable. Lululemon is projecting 2026 revenue between $11.35 billion and $11.5 billion, representing growth of just 2% to 4%, and earnings per share of $12.10 to $12.30, which would represent a decline from the $13.26 earned in fiscal 2025. That EPS contraction alone reflects the degree to which cost pressures, particularly tariffs, are squeezing margins across the business.
Interim co-CEO and CFO Meghan Frank was direct about the tariff headwind in the earnings call. Lululemon expects tariffs to cost the company $380 million this year on a gross basis, up from $275 million in 2025. Even after mitigation efforts, the net impact is projected at $220 million. When a company that built its reputation on premium pricing is absorbing that scale of cost increase while simultaneously trying to pull back from the discounting strategy that eroded its brand positioning, the math gets genuinely difficult.
The discounting issue is central to understanding the broader strategic problem. Lululemon spent much of 2025 leaning on markdowns to move excess inventory, a move that generated short-term sales but damaged the full-price brand identity that justified its premium positioning in the first place. Frank acknowledged the issue plainly: “The work is really underway in terms of our action plan, and we’re really focused on the importance of course correcting on a number of fronts.”
Leadership structure adds another layer of uncertainty. Calvin McDonald stepped down as CEO in January, leaving the company under interim co-CEOs while a global search for a permanent replacement is conducted. A proxy battle initiated by founder Chip Wilson, who has been publicly criticizing the board’s governance and innovation strategy, adds pressure to the search timeline. The board has moved to stabilize governance by adding Chip Bergh, former CEO of Levi Strauss, who joined effective March 13.
Inventories rose 18% to $1.7 billion at the end of Q4, still elevated relative to revenue levels and a reminder that the work of normalizing the supply position is ongoing. Gross margin declined 550 basis points compared to Q4 2024, primarily reflecting both the tariff headwinds and higher markdown penetration, even as Q1 early reads on full-price sell-through showed some improvement versus Q4.
The stock is down more than 51% year to date heading into Thursday’s trading, bringing its trailing price-to-earnings multiple down to roughly 11 times, unusually compressed for a brand with Lululemon’s historical pricing power and international runway. The analyst consensus target of around $206 implies meaningful upside from current levels, but realizing that upside will require management to thread a demanding needle — restoring full-price discipline, managing tariff impacts, and appointing a permanent CEO capable of reigniting North American growth, all simultaneously.