Lululemon Earnings on Deck – What Do Markets Expect From LULU

Lululemon Athletica Inc., the athletic apparel giant, is set to report earnings today, after the market close. LULU's stock has delivered a mixed 2025 so far, with the bears having the early run into April, and the bulls picking up from there. A 33% decline, followed by a 36% rally does in the end leave holders of the stock negative on a year-to-date basis, down 9.33% into the print. Will recent momentum continue, or is there a reversal of fortunes on the cards?

Net revenue is expected by analysts to hit $2.37 billion, which will be up +7.27% from last year. Earnings per share (EPS) is expected at $2.59. The company has beat expectations in each of the past four quarters, with markets likely expecting more of the same from LULU.

Operationally, the company has not been standing still. Lululemon's strategic initiatives, offer up hope of growth. The company is actively pursuing product innovation, with successful launches of new product lines like Glow Up, Daydrift, and BeCalm. These lines have reportedly garnered positive customer feedback, indicating a continued ability to innovate and capture market share.

Furthermore, Lululemon is aggressively expanding its global footprint, planning to open 40 to 45 net new stores in 2025, primarily in international markets. This expansion is projected to contribute to a 10% increase in square footage, demonstrating a commitment to long-term growth and diversification.

Moreover, the company's brand equity remains exceptionally strong, allowing it to command premium pricing and maintain a loyal customer base. Perhaps the market is underestimating Lululemon's ability to adapt and innovate, particularly in the face of evolving consumer preferences. The focus on international expansion could also unlock significant growth opportunities, mitigating the impact of any potential slowdown in the North American market. While short-term pain is undeniable, the long-term potential of Lululemon remains compelling, particularly for investors willing to weather the current volatility.

The analyst community's response in recent weeks has been varied. Barclays, last month, for instance, lowered its price target from $309 to $276, assigning an “equal weight” rating, Morgan Stanley followed suit, lowering their price target also. These adjustments reflect a recalibration of expectations in light of the anticipated margin pressures. The concerns stem from a confluence of factors, including tariffs from China and Mexico, foreign exchange impacts, and the aforementioned investments in infrastructure.

Towards the end of the May and beginning of June, analysts appear to have changed their tunes, and started raising price targets. Piper Sandler, Evercore ISI and Citi analysts all increased their price targets in advance of the upcoming earnings report.

🟩 The Bull Case for NASDAQ: LULU

• Strong brand loyalty and continued revenue growth.
• Successful product innovation and new product line launches.
• Aggressive international expansion plans.
• Long-term investments in distribution center infrastructure.
• Earnings beats

🟥 The Bear Case for NASDAQ: LULU

• Projected margin compression due to tariffs and FX headwinds.
• Deleverage on fixed costs due to distribution center investments.
• Potential slowdown in consumer discretionary spending.
• Significant stock price decline following previous earnings guidance.

The key to future success will lie in the company's ability to effectively manage its cost structure, capitalize on international expansion opportunities, and continue to innovate and resonate with its customer base. As the athleisure market evolves, Lululemon's ability to stay ahead of the curve will ultimately determine its long-term success.