Lululemon After the Print: A Cheaper Premium, Still Waiting on the U.S. Turn
Strong international growth, a reset in leadership, and a powerful rebound attempt inside a still-damaged trend
Lululemon’s LULU 0.00%↑ latest earnings delivered relief, not resolution.
The company beat expectations, raised profit guidance, expanded its buyback, and sparked a sharp rebound in the stock. At the same time, the core debate did not go away. U.S. demand remains soft, margins are under pressure from tariffs and discounting, and a CEO transition signals that execution needs a reset.
This is no longer a story about perfection. It is about whether a high-quality global brand can stabilize its most important market and earn back investor confidence at a lower valuation.
Key Takeaways
Earnings reduced near-term fear but did not fully fix the U.S. demand problem.
International growth is carrying results, while Americas performance still caps the multiple.
Margins are under pressure from tariffs and promotions, but cash generation remains strong.
The stock is attempting a bullish rebound, not a confirmed long-term uptrend.
Actionability depends on disciplined pullbacks or a clean breakout, not chasing strength.
Pipeline, Backlog, Business, and the Latest Earnings
Lululemon does not have a traditional backlog, but demand visibility comes from geography, product cadence, and inventory discipline.
In fiscal Q3, the business showed a clear split:
Net revenue reached $2.6B, up 7% year over year.
International revenue grew 33%.
Americas revenue declined 2%.
Comparable sales rose 1% overall, but Americas comps fell 5% while international comps rose 18%.
This mix explains both the beat and the hesitation that followed earlier this year. International expansion is working. The core U.S. engine is not.
On profitability, the picture was more complicated:
Gross margin was 55.6%, down 290 basis points year over year.
Gross profit still rose 2% to about $1.4B.
Diluted EPS came in at $2.59, ahead of expectations.
Management also expanded the share buyback authorization by $1B and raised full-year EPS guidance to $12.92 to $13.02. That combination helped put a floor under near-term sentiment.
What changed with this earnings report is not the long-term thesis. What changed is timing. The downside tail risk eased, while the recovery path remains uneven.
Fundamental Analysis
Lululemon’s fundamentals still separate it from typical apparel retailers.
From a quality standpoint:
Trailing 12-month revenue is roughly $11.1B.
Operating margin is about 23.3%.
Net margin is about 16.4%.
Trailing levered free cash flow is about $1.17B.
Buybacks over the past year totaled about $1.49B.
The balance sheet remains flexible:
Cash stands near $1.16B.
Inventory is about $1.72B.
Total debt is roughly $1.76B.
This matters because it gives management room to absorb margin pressure without damaging the business.
The pressure points are clear:
Tariffs are expected to hit 2025 income by about $210M.
Operating margin is guided to decline about 390 basis points.
Management is openly planning to reduce inventory units in 2026, signaling tighter control and fewer forced promotions.
At around $206 per share, the stock trades near 11 times earnings. That multiple no longer assumes luxury retail perfection. It assumes stabilization.
What the latest earnings changed is the probability distribution. A near-term collapse is less likely. A fast return to peak margins is also unlikely. The path forward is narrower and execution-driven.
Fundamental conclusion: Lululemon remains a high-quality, cash-generative global brand, but the valuation discount will only close if U.S. comps stabilize and margins stop bleeding. Until then, the stock deserves patience and selectivity.
Technical Analysis
The technical picture mirrors the fundamentals. Improvement is visible, but confirmation is incomplete.
On the weekly timeframe, the long-term trend is still damaged. Price remains well below major long-term resistance clustered in the 334 to 349 zone, with higher historical ceilings near 400. That is the residue of the 2024 to 2025 drawdown.
What matters is momentum. Weekly RSI sits near 60, a recovery regime rather than a weak bounce. Weekly MACD is curling higher and expanding positively. That combination supports the idea of a multi-week rally, even inside a longer-term downtrend.
The daily timeframe is where the decision lives. Price has reclaimed key intermediate averages near 189, confirming the rebound is real. However, it remains capped below major daily ceilings:
The first major trend ceiling sits near 215.88.
A higher, more structural ceiling sits near 252.61.
Daily RSI around 44 to 45 and a still-negative but improving MACD suggest the move needs digestion. Sharp rallies without confirming momentum often pause or pull back before continuing.
On the 4-hour timeframe, the move is clearly bullish but overheated. Price is well above short-term trend support in the 169 to 179 zone. RSI near 59 is supportive, but stochastic readings above 92 signal exhaustion. Price pressing the upper volatility band near 206 to 207 increases the odds of consolidation or a pullback.
Key levels define the structure:
Upside gates derived from extension measurements sit at:
210.98 as the first major magnet.
222.81 as the next target.
234.64 as a stretch objective if momentum expands.
Support zones that define the health of the move sit at:
203.26 as the first must-hold level.
197.86 to 194.10 as the core retest band.
Below that, 189.31 to 187.32 becomes the last structural defense.
A failure toward 180 would signal the rally has failed.
From a scenario perspective, this is best viewed as a bullish rebound attempt inside a larger damaged trend. Elliott-style interpretations support that framing, with a strong initial advance likely followed by a corrective pullback before the next push.
Technical conclusion: Momentum is improving across timeframes, but the rally needs either consolidation above 203 or a clean break above 211 to become durable. Until then, respect the ceilings.
Trade Plan
This is a medium- to long-term framework, not a chase.
