Canada's Lululemon posts 7% revenue growth in Q3 despite US slowdown

The gross profit increased 2 per cent to $1.4 billion, though gross margin contracted by 290 basis points (bps) to 55.6 per cent. The operating income fell 11 per cent to $435.9 million, with operating margin declining to 17 per cent. Diluted earnings per share (EPS) stood at $2.59, compared with $2.87 a year earlier.

Region-wise, Americas revenue declined 2 per cent, international revenue surged 33 per cent. Comparable sales increased 1 per cent, or 2 per cent on a constant-dollar basis, with international comparable sales jumping 18 per cent, offsetting a 5 per cent decline in the Americas, Lululemon Athletica said in a press release.

During the quarter, Lululemon opened 12 net new company-operated stores, ending with 796 stores globally. The company also repurchased 1 million shares for $189 million. In December, the board approved a further $1 billion increase in the share repurchase programme, taking remaining authorisation to approximately $1.6 billion.

Lululemon ended the quarter with $1 billion in cash and cash equivalents and $593 million available under its revolving credit facility. Inventories increased 11 per cent YoY to $2 billion, with unit inventories up 4 per cent.

“We delivered better-than-expected revenue and EPS in the third quarter as a result of our disciplined execution and ongoing strength internationally. Looking forward, we will continue to leverage our strong financial position to invest in our growth initiatives, while maintaining operational rigor,” said Meghan Frank, chief financial officer (CFO) at Lululemon.

Looking ahead, the company expects fourth quarter (Q4) FY25 revenue between $3.5 billion and $3.585 billion, with diluted EPS of $4.66 to $4.76. For full-year 2025, revenue is projected at $10.962 billion to $11.047 billion, with EPS of $12.92 to $13.02.

The outlook factors in an estimated $210 million reduction in operating income due to higher US import tariffs and the removal of the de minimis exemption, partially offset by mitigation measures. The guidance excludes the impact of any future share repurchases.

The outlook factors in an estimated $210 million reduction in operating income due to higher US import tariffs and the removal of the de minimis exemption, partially offset by mitigation measures. The guidance excludes the impact of any future share repurchases, added the release.

ALCHEMPro News Desk (SG)