Story Stocks^®

Lululemon (LULU) provided a strong raised outlook for Q4 earlier this morning, primarily driven by a robust holiday season. The company now expects net revenue and diluted earnings per share to come in at the high end of its previously issued guidance ranges of $3.50–$3.59 bln and $4.66–$4.76, respectively.

• The company’s raised outlook suggests the strategy to revitalize its U.S. business is gaining traction. This follows a challenging Q3 where revenue in the Americas region decreased 2% -- a sharp contrast to the International business, which saw revenue surge by 33% (led by a 46% jump in China).
• Growth in Q4 is expected to be led by Outerwear, which showed double-digit strength in the prior quarter, along with core performance categories like Run and Train. Accessories also remain a key holiday driver.
• Management’s turnaround strategy is built on three pillars: Product Creation (increasing the frequency of newness to a 35% mix by spring), Product Activation (localizing store assortments and merchandising), and Enterprise Efficiency (streamlining operations to offset rising tariff costs).
• The company acknowledged it had dropped the ball on product newness earlier in the year, leading to a loss of market share to rivals like Alo and Vuori, but the raised guidance indicates the newness pipeline is beginning to resonate.
• LULU recently announced that CEO Calvin McDonald will step down at the end of the fiscal year (January 31, 2026), with CFO Meghan Frank and CCO André Maestrini serving as interim co-CEOs.

Briefing.com Analyst Insight:

LULU’s raised guidance is an encouraging sign that the retailer is successfully navigating a pivot point. While the dropped ball on product innovation created a significant headwind in the U.S. market, the holiday performance suggests that the three-pillar action plan is bearing fruit. However, the stock remains in a state of flux due to the CEO transition and a public proxy battle launched by founder and major shareholder Chip Wilson. Wilson has been highly critical of the board’s succession planning, nominating three independent directors - Marc Maurer (former On Holding co-CEO), Laura Gentile, and Eric Hirshberg - to oversee the transformation. Ultimately, though, the leadership shuffle and activist pressure from Wilson could serve as a bullish catalyst if it leads to a permanent CEO with deeper product experience.