Lululemon sees soft Q3 2025 performance

Core Insights - Lululemon Athletica reported a 7% year-on-year increase in net revenue for Q3 fiscal 2025, reaching $2.6 billion, with uneven regional performance [1] - The company experienced a decline in operating income by 11% to $435.9 million, resulting in a reduced operating margin of 17% [2] - The retailer's diluted earnings per share decreased from $2.87 to $2.59 compared to the previous year [2] Financial Performance - Gross profit increased by 2% to $1.4 billion, but gross margin contracted by 290 basis points to 55.6% [2] - Comparable sales rose by 1%, or 2% when adjusted for currency, with a 5% decline in the Americas offset by an 18% increase internationally [1] - Inventories grew by 11% year-on-year to $2 billion, which is 4% higher in unit terms [3] Future Projections - For Q4, Lululemon expects revenue between $3.50 billion and $3.58 billion, indicating a decline of 3% to 1%, or growth of 2% to 4% when excluding the 53rd week of fiscal 2024 [4] - Full-year revenue is projected to be between $10.962 billion and $11.04 billion, reflecting a growth of 4%, or 5% to 6% without the impact of the 53rd week [4] - Full-year diluted earnings per share are anticipated to be between $12.92 and $13.02 [4] Management Changes - CEO Calvin McDonald will step down on 31 January 2026, with Marti Morfitt named executive chair and interim co-CEOs appointed [5][6] - The board has initiated a search for McDonald's successor through an external company [5]