Lululemon Athletica (LULU) Stock Forecast & Price Target

Lululemon Athletica projected total sales of $2.496 billion, reflecting a year-over-year increase of 4.2%, with notable international growth of 33% driven by strong performance in China and other global markets. The company surpassed consensus estimates with total sales growing 7.1% to $2.566 billion, while managing to mitigate gross margin contraction better than anticipated, standing at 55.6% compared to earlier guidance. Additionally, Lululemon saw significant revenue increases in specific regions, including a 46% year-over-year growth in Mainland China, indicating robust demand and effective product introductions.

Lululemon Athletica is currently facing considerable challenges that point to a negative financial outlook, primarily driven by a significant contraction in gross and operating margins. The company's gross margin is projected to decline approximately 580 basis points year-over-year due to factors such as higher tariffs, the removal of the de minimis exemption, and investments in store expansion, resulting in a downward revision of operating margin expectations by 390 basis points for the year. Furthermore, management anticipates ongoing pressure on operating margins into 2026, largely attributed to the continued impact of tariffs and necessary reinvestments in expenses such as compensation.