lululemon (LULU) Q3 2025 Earnings Call Transcript - Rewrite: Transcript of lululemon's (LULU) Q3 2025 Earnings Call

Date: Thursday, December 11, 2025, 4:30 p.m. ET

Participants

• Calvin McDonald CEO
• Meghan Frank CFO
• Howard Tubin VP, Investor Relations

CEO Transition

Calvin McDonald announced he will step down as CEO on January 31 after more than seven years leading lululemon. He reflected on the company's growth during his tenure: tripling annual revenue to an expected $11 billion, expanding global presence from 18 to over 30 markets, and growing China Mainland into the second-largest market. lululemon's EPS is projected to achieve a 20% CAGR from 2018 to 2025, with $1 billion in cash and no debt.

Interim leadership will include Marti Morfitt as Executive Chair and Meghan Frank and Andre Maestrini as co-CEOs until a permanent CEO is appointed. Calvin will serve as an advisor through March 2026.

Q3 2025 Financial Overview

Total revenue grew 7% to $2.6 billion. Comparable sales rose 2%. Regional performance:

• Americas: down 2% overall (U.S. -3%, Canada flat)
• China Mainland: up 46% (47% constant currency), comparable sales +25%
• Rest of World: revenue up 19%, comparable sales +9%

Store count reached 796, with 47 net new stores since Q3 2024. Digital revenue increased 13%, representing 42% of total sales.

By category, mens revenue grew 8%, womens 6%, and accessories/other 12%. Gross profit was $1.43 billion (55.6% of revenue), with a decrease driven by tariffs and markdowns. SG&A expenses totaled $988 million (38.5% of revenue). Operating income was $436 million (17%), with net income of $307 million or $2.59 per share.

Q4 2025 and Full-Year Outlook

• Full-year revenue expected: $10.96$11.05 billion (+4% YoY)
• Q4 revenue projected: $3.5$3.59 billion (-3% to -1% YoY)
• Gross margin forecast: Full-year decline ~270 bps; Q4 decline ~580 bps (tariffs/de minimis impact ~410 bps)
• Operating margin: full-year decrease ~390 bps; Q4 decrease ~680 bps
• EPS: Full-year $12.92$13.02; Q4 $4.66$4.76
• Capital expenditures: expected near low end of $700720 million
• Net new stores in 2025: ~46, with 36 optimizations

Key Initiatives and Strategic Focus

Product Creation

• Refreshing the product assortment, increasing new style penetration to 35% in Spring 2026
• Updates to franchises including Milemaker, Shake It Out, Tumbled Fleece, and Scuba Waffle
• Reducing product development cycle from 1824 months to 1214 months, with fast-track design and chase capabilities

Product Activation

• Enhancing in-store experience with locally curated assortments and visual merchandising improvements
• Website redesign for modernized digital experience and storytelling
• Engaging high-value guests via updated membership program and Amex Platinum partnership
• Integrated global marketing efforts focusing on product awareness and innovation

Enterprise Efficiency

• Operational efficiency improvements to offset tariff increases and de minimis removal
• Supply chain initiatives, strategic pricing, and vendor negotiations
• Maintaining strong cash flow and investing in long-term growth

U.S. Market and Holiday Performance

U.S. guest metrics remain steady with growth in new and retained guests. Thanksgiving weekend performance was strong, with successful product launches and an earlier Black Friday promotion. Traffic and demand trends slowed slightly post-holiday, which is reflected in Q4 guidance. Focus remains on increasing visit frequency and spend among high-value guests.

International Growth

China Mainland exceeded expectations with strong demand for performance outerwear. Rest of World expansion includes the new Gangnam store in Seoul and the third store in Istanbul. lululemon continues to scale globally while modernizing store design and experiences.

Outlook on Product, Pricing, and Margins

New product development emphasizes performance activities (run, train, yoga, golf, tennis) and lifestyle categories. Pricing actions have been modest, with careful monitoring of elasticity. Margin pressures from tariffs and costs are expected in 2026, but efficiency initiatives aim to mitigate long-term impacts.

Leadership and Governance

The search for a permanent CEO has begun, focusing on a leader with growth and transformation experience. Interim co-CEOs and Executive Chair will guide operations and strategy during the transition.

Summary

lululemon concludes Q3 2025 with strong international growth, a refreshed product pipeline, and solid financial positioning. The company is executing an action plan centered on product creation, activation, and enterprise efficiency while navigating a U.S. market with moderated trends. Leadership transition is underway with clear continuity plans and confidence in future performance.

Sources:

• lululemon (LULU) Q3 2025 Earnings Call Transcript