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Lululemon Athletica (LULU) is a Canadian multinational company known for the development, distribution and retailing of high-quality athletic apparel, footwear and accessories. It started as a yoga-inspired brand and has expanded into running, training and lifestyle segments for men and women. The company values innovation through its proprietary high-performance fabrics and functional designs developed in its Whitespace R&D laboratory.
Founded in Vancouver in 1998, the company now operates more than 700 stores in North America, Europe and Asia Pacific.
Lululemon suffered sharp declines in 2025, significantly underperforming the S&P 500 ($SPX). In the last five days, the stock is up 6%, while it is up 2% in the last month, but remains down 32% over six months. Year-to-date (YTD), shares are down 54%. In contrast, the S&P 500 gained over 13% over the same period, exacerbating Lululemon’s relative weakness.
The underperformance is due to weak US demand and margin pressure, although rising international sales in recent quarters suggest a possible recovery path.
Lululemon announced its second-quarter 2025 results on September 4, reporting earnings per share of $3.10, beating analyst expectations of $2.87. Total revenue rose 7% year-over-year to $2.53 billion, but fell slightly short of the consensus estimate of $2.54 billion. Despite the profit increase, shares fell over 17% after the report as investors reacted to a weaker full-year outlook and pressure on margins.
Comparable sales rose 1%, with international markets, particularly China, driving growth while the U.S. segment reported flat performance due to demand for softer apparel.
Lululemon’s operating income fell 3% to $524 million as gross margin shrank 110 basis points to 58.5% due to higher supply chain and tariff costs. Inventories increased 21% year-over-year to $1.7 billion, reflecting seasonally higher inventory levels and slower domestic sales.
The balance sheet remained healthy, supported by $1.2 billion in cash and $393 million in available revolving credit capacity. Digital sales continued to play an important role, contributing 39% of total sales, highlighting strong online engagement despite retail headwinds.