0001397187-25-000039
SEC filingRevenue grew 7% but margins compressed due to tariffs, costs; Americas comparable sales declined 4%.
In Q2 2025, Lululemon's net revenue increased 7% to $2.53 billion, driven by strong international growth. Gross profit rose 4.6% to $1.48 billion, but gross margin contracted 110 basis points to 58.5% due to higher markdowns, tariffs, and occupancy costs. Operating income fell 3% to $523.8 million, with operating margin down 210 bps to 20.7%, as SG&A expenses grew 9.1% outpacing revenue. Net income declined 5.6% to $370.9 million, and diluted EPS was $3.10 versus $3.15 last year. The effective tax rate increased to 30.5% from 29.6%.
Americas revenue edged up 1% to $1.76 billion, but comparable sales fell 4% due to lower conversion and store traffic, partially offset by e-commerce gains. Gross margin in the Americas declined 130 bps to 61.7%. China Mainland remained a growth engine with revenue up 25% to $392.9 million, comparable sales up 17%, and gross margin improved 90 bps to 63.5%. Rest of World revenue rose 19% to $374.1 million, comparable sales up 12%, though gross margin slipped 60 bps to 54.1%. International segments now represent 30.4% of total revenue, up from 26.6% a year ago.
Management provided an estimate that increased tariffs and the removal of the de minimis exemption will reduce gross profit by approximately $240 million in fiscal 2025, with $10 million already recognized in the first half. Mitigation actions include vendor negotiations and price increases, but they are not expected to fully offset the impact. The company noted ongoing macroeconomic headwinds including trade policy volatility, inflation, and foreign currency fluctuations. No specific revenue or EPS guidance was provided. Lululemon continues to invest in store expansion, adding 26 net new stores in the Americas and 27 in China Mainland year-over-year.
As of August 3, 2025, total inventory stood at $1.72B, up 19% from $1.44B at year-end. The company maintains a $400M revolving credit facility with no borrowings outstanding (only $6.8M in letters of credit). Cash and equivalents are not disclosed in the notes, but money market funds of $107.6M are reported as Level 1 assets.
No purchase commitments or material contractual obligations were disclosed in the notes. The only contingencies relate to legal proceedings, which management believes will not have a material adverse effect.
The board has authorized a $3.0B share repurchase program (initially $1.0B in Nov 2023, with $1.0B increases in May 2024 and Dec 2024). During the first two quarters of 2025, 2.5M shares were repurchased for $715.7M, leaving $0.9B authorized remaining as of August 3, 2025. No dividends or debt activities are reported. Capital expenditures are not disclosed in the notes.
For Q2 2025, total segment revenue was $2.53B with operating income of $853.1M. Americas contributed 69.6% of revenue and 72.6% of segment operating income, with a 35.2% margin. China Mainland posted a 38.8% margin on $392.9M revenue, growing 25% YoY. Rest of World had a 21.7% margin on $374.1M revenue, up 18.6% YoY. Corporate costs totaled $329.3M, resulting in consolidated operating income of $523.8M.