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Call sheet · Q4'25

Lululemon Athletica (LULU)

Q4'25 earnings call · held March 17, 2026 · compared with the Q3'25 call · management-credibility review
10/12
Disclosure score
1 high, 3 medium, 3 low flags
Financial quality
Bottom line
The sleeper story is employee purchase acceleration on new drops - internal conviction often leads external sales by a quarter. While everyone will focus on the brutal 250bp operating margin decline guidance, the real insight is this is a North America-specific problem with international margins healthy. The binding constraint isn't demand (they're still #1 in women's activewear) but rather product mix fatigue requiring the 35% newness refresh. Management's most revealing moment: acknowledging Q4 was the 'lowest waterline' for markdowns while employees are buying more new product. My view changes if Q1 full-price improvement doesn't materialize or if international margins start deteriorating like North America.

The 30-second version

  • The employee demand signal is the real tell
  • Full-price trajectory flipping positive in H2 - but from a brutal starting point
  • International margins aren't broken - North America specific problem

What changed this quarter

MetricQ3'25Q4'25Change
Total Revenue$2.6B (+7% YoY in Q3)$3.6B (+1% YoY, +6% ex-53rd week)Growth decelerated by 600bp
North America Revenue-2% YoY in Q3Flat YoY (ex-53rd week)+200bp improvement but still flat
China Mainland Revenue+46% YoY in Q3+28% YoY-1800bp deceleration but still strong
Gross Margin55.6% (-290bp YoY in Q3)54.9% (-550bp YoY)Deteriorated by additional 260bp
Operating Margin17.0% (-350bp YoY in Q3)22.3% (-660bp YoY)Further 310bp deterioration
EPS$2.59 vs $2.87 prior year Q3$5.01 vs $6.14 prior year Q4-$1.13 YoY decline worsened
Markdown Impact+90bp YoY in Q3+130bp YoYMarkdown pressure accelerated by 40bp
Square Footage Growth12% YoY in Q311% YoYSlight deceleration in expansion
Inventory Units~4% increase in Q3~6% increaseUnit growth accelerated but below guidance
New Style Penetration23% in 2025Targeting 35% in 2026+1200bp newness increase planned

Accountability tracked

8 new promises made5 narrative shifts flagged6 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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