Lululemon Athletica Inc. (NASDAQ: LULU) reported mixed fourth-quarter fiscal 2025 results on March 17, 2026, creating a volatile market reaction. The athletic apparel company posted revenue of $3.64 billion, a 1% year-over-year increase, and diluted earnings per share (EPS) of $5.01. Both figures exceeded Wall Street expectations, which were set at $3.62 billion in revenue and an EPS of approximately $4.79.
However, investor sentiment was quickly dampened by the company's guidance for fiscal year 2026. Lululemon projected revenue between $11.35 billion and $11.50 billion and EPS in the range of $12.10 to $12.30. This outlook fell short of analyst consensus estimates of $11.51 billion in revenue and $12.58 EPS. For the first quarter of 2026, the company anticipates revenue of $2.40 billion to $2.43 billion and EPS of $1.63 to $1.68, also below expectations.
The market reaction was split. Initially, the stock climbed 1.29% in aftermarket trading to $161.98 following the earnings beat. Yet, broader concerns about the weak forward guidance and underlying challenges ultimately weighed on the stock, which has declined roughly 23% year-to-date and is down approximately 51% from a year ago, trading near a six-year low.
Geographic performance was a tale of two markets. International sales, led by a 28% surge in China Mainland revenue, provided a significant boost with a 17% overall jump. Conversely, North American revenue, the company's core market, was flat, with a reported 4% decline in the U.S. specifically. Comparable sales rose a modest 3% globally.
Profitability faced headwinds. Gross margins contracted by 550 basis points year-over-year to 54.9%, which the company attributed to U.S. import tariff pressures and other rising costs. Operating margin also fell by 660 basis points to 22.3%. Inventory levels finished the year at $1.7 billion, an 18% increase from the prior year.
Leadership and governance remain in flux, adding to uncertainty. The company is currently conducting a CEO search following Calvin McDonald's departure in January. Furthermore, founder Chip Wilson is engaged in a proxy fight, nominating three directors to the board. In a stabilizing move, former Levi Strauss CEO Chip Bergh was appointed to join Lululemon's board, set to take a seat at the 2026 annual meeting.
Interim co-CEO Meghan Frank emphasized improving full-price sales in North America as a priority. While new product launches and a focus on customer experience are part of the forward strategy, Lululemon faces significant challenges from intense competition (Nike, Alo Yoga, Vuori), slowing U.S. demand, and ongoing tariff pressures.
