0001397187-25-000055
SEC filingNet revenue grew 7% to $2.6B, but margins compressed 290 bps on tariffs, driving EPS down 10%.
In the third quarter of fiscal 2025, Lululemon reported net revenue of $2.56592B, up 7% year-over-year, driven by robust growth in China Mainland (+46%) and Rest of World (+19%) that offset a 2% decline in the Americas. Gross profit rose 2% to $1.425916B, but gross margin contracted 290 basis points to 55.6%, primarily due to a 300 bps net decrease in product margin from higher tariffs, markdowns, and credit card affiliate programs, partially offset by pricing and lower product costs. Selling, general and administrative expenses increased 8.6% to $988.254M, driven by higher employee costs, variable costs, and digital marketing. Income from operations fell 11% to $435.886M, and operating margin declined 350 bps to 17.0%. Net income decreased 12.8% to $306.835M, with diluted EPS of $2.59 compared to $2.87 in the prior year. The effective tax rate rose slightly to 30.5% from 30.2%.
The Americas segment saw net revenue decline 2% to $1.733382B, with comparable sales down 5% due to lower average order value, conversion, and store traffic, partially offset by e-commerce traffic growth from credit card affiliate programs. Gross margin in the Americas dropped 510 bps to 56.6% on lower product margin and higher occupancy. Segmented operating margin contracted 710 bps to 29.9%.
China Mainland continued its strong momentum, with net revenue surging 46% to $465.362M, driven by a 24% increase in comparable sales (25% constant currency) from higher e-commerce traffic, partially offset by lower average order value. New store openings contributed $46.6M. Gross margin improved 250 bps to 64.3% due to lower occupancy costs, while product margin declined slightly. Segmented operating margin increased 250 bps to 37.2%.
Rest of World net revenue grew 19% to $367.176M, supported by new store contributions ($35.1M) and a 9% comparable sales increase driven by higher traffic. Gross margin ticked down 50 bps to 54.7% on lower product margin and higher distribution costs, partially offset by lower occupancy. Segmented operating margin rose 80 bps to 23.1%.
Corporate expenses decreased to $339.6M (down $4.1M) due to lower incentive compensation and professional fees, partially offset by higher technology and depreciation costs.
Management highlighted that macroeconomic conditions, including tariffs, inflation, and geopolitical instability, continue to pressure the Americas business. The impact of increased tariffs and the removal of the de minimis exemption is estimated to reduce 2025 operating income by approximately $210 million, with $60 million already recognized in the first three quarters. Mitigation efforts (vendor negotiations and selective price increases) are not expected to fully offset the impact. No formal quantitative guidance for 2026 was provided, but the company expects ongoing exchange rate volatility and tariff-related headwinds. The OBBBA tax law changes are not expected to have a material impact. Overall, the company's outlook is cautious, with international expansion serving as the primary growth engine while the Americas face margin compression.
As of November 2, 2025, Lululemon holds $1.0B in cash and cash equivalents with zero debt (no borrowings on its $600M revolving credit facility, only $7M in letters of credit). Total stockholders' equity stands at $4.5B. Inventory increased to $2.0B from $1.4B at fiscal year-end, reflecting seasonal build and growth in China Mainland.
No material purchase commitments or long-term contractual obligations are disclosed in the Notes. The company has a $600M revolving credit facility maturing 2030, with no outstanding borrowings. A China Mainland uncommitted facility of $42.2M is available. Supplier financing program outstanding totals $46.9M.
Share repurchases remain aggressive: $906.6M spent on 3.5M shares in the first three quarters of 2025, with $0.7B remaining under the $3.0B program (authorized in increments through December 2024). No dividends are paid. Capital expenditures totaled $497.6M (6.7% of revenue), up from $454.3M in the prior year period, reflecting store growth and technology investments. No debt was issued or repaid.
The company reports three segments: Americas, China Mainland, and Rest of World (APAC + EMEA). For Q3 2025:
Geographic breakdown within Americas shows US $1.38B, Canada $332M, Mexico $21M. Within China, Hong Kong/Taiwan/Macau contributed $46M. Product category mix: women's apparel 64%, men's 23%, accessories 13%. Channel mix: company-operated stores 47%, e-commerce 42%, other 11%.