Lululemon (LULU) Q4 2025 earnings

Lululemon offered a weak outlook for 2026 on Tuesday, as tariffs, higher expenses and a dramatic proxy battle with its founder weighed on its bottom line.

Athleisure’s guidance for both the current quarter and fiscal year was lower than expected on the top and bottom lines.

Lululemon expects first-quarter sales to range between $2.40 billion and $2.43 billion, weaker than estimates of $2.47 billion, according to LSEG. It expects earnings per share to range between $1.63 and $1.68, also weaker than estimates of $2.07.

For the full year, Lululemon expects sales to range between $11.35 billion and $11.50 billion, below expectations of $11.52 billion. Earnings guidance of $12.10 to $12.30 per share was also much weaker than estimates of $12.58.

“The work is really underway in terms of our business plan, and we’re really focused on the importance of course correction on a number of fronts,” Interim Co-CEO Megan Frank told CNBC in an interview. “We have a new creative director, whose first line is coming into Q1, and we’re seeing some green shoots, I would say, from the product in Q1, so we’re excited about some of the momentum that we have on that line. We’ve had some great response from some of our recent product activations, and then we’re also reducing our speed to market.”

During Lululemon’s holiday quarter, the company beat estimates on both the top and bottom lines, although Wall Street has lowered its forecasts for the period in recent months.

Here’s how the Vancouver-based retailer performed during its fiscal fourth quarter compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG:

• EPS: $5.01 vs. $4.78 expected
• profit: $3.64 billion versus $3.58 billion expected

The company’s net income for the three-month period ending February 1 was $586.9 million, or $5.01 per share, compared to $748.4 million, or $6.14 per share, in the previous year.

Sales rose slightly to $3.64 billion, up about 1% from $3.61 billion a year earlier.

Lululemon raised its fourth-quarter financial guidance during the ICR conference in Orlando earlier this year, so all eyes were on the company’s 2026 guidance after more than a year of weak performance.

The retailer, which has always been a premium brand and rarely offers promotions, has been relying on discounts to boost sales and move inventory. The company is now working to roll back that strategy this year, Frank said. Lululemon said it expects the move to impact sales in the near term, but it will return the company to operating at full price over time.

At the same time, it is seeing a number of pressures on its bottom line. High tariffs and the end of the lower exemption still represent a significant cost to the company.

This year, Lululemon expects the tariffs to cost the company $380 million, up from $275 million last year, on a total basis. Once mitigation efforts are taken into account, the net impact is expected to reach $220 million in 2026, up from $213 million in 2025.

Lululemon has been negotiating with suppliers and taking other measures to reduce its exposure to the tariffs, but it is not increasing prices to offset the additional costs, especially as it looks to promotions to boost sales in recent months. The brand was already priced toward the high end of the market before President Donald Trump’s tariff hikes last year, leaving it with fewer tools in its arsenal to offset the tariffs, especially as it faces intense competition and a slowdown in the athleisure market.

Last year, the company raised prices on a select number of items. Frank said shoppers are still responding positively so far, but there are no plans to build on those increases at this time.

Beyond the tariffs, the company is also seeing rising expenses from marketing, labor, incentives and costs related to its proxy competition with founder Chip Wilson. Wilson, Lululemon’s largest independent shareholder, has been pressing the company to make changes to its board and criticized it for losing sight of its creative vision.

Just before announcing earnings, Lululemon announced it would add the former Levi Strauss CEO Chip Bergh to its Board of Directors. Berg was not among the candidates Wilson put forward for consideration, but he has significant experience in public companies and spent about 13 years as CEO of Levi’s. During his tenure at the company, Levy began a more profitable direct selling strategy and sales increased by approximately 30%.

Before the earnings call, Wilson issued a statement saying shareholders would “critically evaluate” any claims of success or improvement from Lululemon when it releases results.

“The fundamental issue at lululemon is one the company has struggled with for years: there is a disconnect between the company’s creative engine and the board’s understanding of how brand strength and product differentiation feed into cultural strength, margin durability and long-term shareholder value.”

Lululemon declined to comment.

While parts of Lululemon’s business are still growing, it has primarily seen this expansion in China and in other international territories, which make up a small portion of total revenue. Same-store sales in its largest region, the Americas, haven’t grown in about two years, and Lululemon expects another year of declines in 2026.

The company said it expects sales in the Americas to decline by between 1% and 3% in 2026.

Meanwhile, sales in China are expected to grow by about 20%, and the rest of the world by a moderate rate.