Company Reports

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While many firms are looking to compete in athleisure, we believe Lululemon will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our Narrow Morningstar Economic Moat Rating is based on a brand-based intangible asset.

Lululemon's second-quarter sales fell 4% on an 8% decline in the Americas (67% of sales) and a 4% international increase (33%). Including a 560-basis-point benefit from tariff refunds, operating margin fell 190 basis points to 18.8% on sales weakness and higher marketing spending.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While many firms are looking to compete in athleisure, we believe Lululemon will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on a brand-based intangible asset.

Lululemon's first-quarter sales rose 4% as increases of 30% in mainland China (19% of sales) and 13% in other international (15%) offset a 3% decline in the Americas (66%). Gross and operating margins fell 410 and 730 basis points, respectively, to 54.2% and 11.2%, on higher tariff and store costs.

Lululemon named former Nike executive Heidi O'Neill as its new CEO. Meghan Frank and André Maestrini have led the firm on an interim basis since Calvin McDonald departed at the end of January. O'Neill will officially join Lululemon when her non-compete agreement with Nike expires in September.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While many firms are looking to compete in athleisure, we believe Lululemon will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on a brand-based intangible asset.

Lululemon's fourth-quarter comparable sales declined 1% in the Americas (74% of sales) but rose 16% internationally. Its operating margin fell by more than 6 percentage points to 22.3% as its gross margin plummeted 550 basis points to 54.9% on higher tariffs and markdowns.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While many firms are looking to compete in athleisure, we believe Lululemon will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on a brand-based intangible asset.

Lululemon's third-quarter sales rose 7% as a 2% Americas decline was offset by 33% international growth. Due to higher tariffs, gross margin fell to 55.6% from 58.5% and operating margin fell to 17% from 20.5%. Separately, it was revealed that Calvin McDonald will step down as CEO at January's end.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While many firms are looking to compete in athleisure, we believe Lululemon will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on the company's intangible brand asset.

Lululemon's second-quarter sales increased 7% but Americas (70% of total) same-store sales fell 4%. The firm's gross margin fell 110 basis points to 58.5% on higher markdowns and tariffs, and its operating margin dropped to 20.7% from 22.8%. More significantly, full-year guidance was reduced.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While many firms are looking to compete in its categories, we believe Lululemon benefits from the athleisure fashion trend and will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on the company's intangible brand asset.

Lululemon achieved 7% sales growth in 2025's first quarter. Due to an increase in costs, its operating margin fell 110 basis points to 18.5%. Shares plummeted more than 20% in after-hours June 6 trading as it lowered its full-year earnings outlook on tariff-related costs and economic uncertainty.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While there are many firms looking to compete in its categories, we believe Lululemon benefits from the athleisure fashion trend and will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on the company's intangible brand asset.

Even though we had lifted our estimates after its holiday sales update (see our Jan. 13 note), Lululemon’s fourth-quarter results eclipsed our forecast. However, shares fell about 10% in March 27 postmarket trading on weakening US sales trends that led to a disappointing 2025 outlook. Specifically, the firm guided to total sales growth and earnings per share of 5%-7% and $14.95-$15.15, respectively, versus our estimates of 8.6% and $15.52. Although we may lower our near-term forecast, Lululemon has a history of providing conservative guidance, and the effect on our $315 per share fair value estimate is likely to be immaterial. We think Lululemon’s brand strength, the source of our narrow moat rating, holds despite recent challenges related to rising competition and its product management. Shares trade close to our valuation but could become attractive if weakness persists.

Lululemon raised its fourth-quarter guidance after strong holiday sales. We attribute this performance to the popularity of the company’s brand, the source of our narrow moat rating, and a steady stream of new apparel releases. In addition, Lululemon has stepped up its marketing, including the sponsorship of more professional athletes. With solid recent results and more innovation expected in 2025, investors’ pessimism about its slowing sales in North America and competition has dissipated; shares are up about 75% over the past five months. We are lifting our fair value estimate to $315 from $310 but rate shares as overvalued.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While there are many firms looking to compete in its categories, we believe Lululemon benefits from the athleisure fashion trend and will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on the company's intangible brand asset.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While there are many firms looking to compete in its categories, we believe Lululemon benefits from the athleisure fashion trend and will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on the company's intangible brand asset.

Narrow-moat Lululemon shook off the troubles of 2024’s first half by posting third-quarter sales and earnings that surpassed our expectations. Although comparable sales fell 2% in the Americas (against 13% growth a year ago), there are reasons to be optimistic about upcoming product launches in 2025, and its international sales have soared. We expect to lift our $296 per share fair value estimate on Lululemon by a mid-single-digit percentage, but rate its shares as overvalued after rallying more than 40% over the past three months.

We think Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While there are many firms looking to compete in its categories, we believe Lululemon benefits from the athleisure fashion trend and will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products. Our narrow moat rating is based on the company's intangible brand asset.