Lululemon Athletica Inc. (LULU): Business Model Canvas [Dec-2025 Updated]

You're looking to cut through the noise and see exactly how Lululemon Athletica Inc. is planning to hit its projected $10.850 billion to $11.000 billion in net revenue for fiscal year 2025, right? After two decades analyzing these giants, I can tell you their model is a fascinating tug-of-war: they're doubling down on proprietary tech and community engagement-like those local ambassadors-while simultaneously wrestling with inventory bloat, which was up 21% by Q2 2025, and a gross margin dip of 300 bps. It's premium pricing meeting supply chain reality. Here's the quick math: their brand equity is the engine, but inventory management is the immediate speed bump. Dive into the canvas below to see the nine blocks that define their current strategy, from their 770+ stores to their aggressive international push in places like China Mainland.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Key Partnerships

You're looking at the critical external relationships Lululemon Athletica Inc. relies on to deliver its value proposition, especially as it pushes hard on sustainability and community engagement. These partnerships are not just transactional; they are strategic investments in future capabilities and brand alignment.

Global third-party manufacturers (outsourcing majority of production) form the backbone of Lululemon Athletica Inc.'s ability to scale. The company maintains a lean internal manufacturing footprint, relying heavily on a network of external partners, predominantly located in Asia, to meet global demand. This structure allows Lululemon Athletica Inc. to remain agile while managing capital expenditure on production assets.

Here's a look at the geographic distribution of their outsourced production, based on recent supplier data:

Manufacturing Location	Percentage of Production (Approximate)	Facility Count/Supplier Note
Vietnam	39%	Manufactures approximately one-third of goods; works with suppliers like Delta Galil Industries Ltd.
Cambodia	14%	A key sourcing location.
Sri Lanka	12%	Works with suppliers such as Mas Amity Pte. Ltd.
Bangladesh	8%	Part of the Asian manufacturing hub.
Indonesia	7%	Contributes to the outsourced volume.
Total from Top 5 Asian Markets	80%	The majority of final product manufacturing is concentrated here.

Lululemon Athletica Inc. works with about 60 suppliers worldwide, operating across 138 facilities, with nearly all being Top Tier centers handling final assembly. The company emphasizes lasting relationships over short-term contracts, evidenced by its vendor grant program supporting projects focused on workplace wellbeing and gender equity with 13 different suppliers in 2024.

Fitness professionals and local studio ambassadors (community building) are crucial for embedding the brand within local fitness ecosystems. While specific, current numbers on the ambassador roster size aren't always public, this partnership channel drives authentic product trial and community event participation, which is a core differentiator against competitors. This grassroots approach fuels the brand's premium perception.

Material science firms (e.g., Samsara Eco, ZymoChem) for sustainable innovation represent a significant capital and strategic commitment to future-proofing the product line. Lululemon Athletica Inc. is actively investing in and partnering with innovators to reduce reliance on virgin, fossil-fuel-derived materials, aligning with its 2030 goal of sourcing 100% preferred materials.

Key material science collaborations include:

• Partnering with ZymoChem on a multi-year collaboration to scale bio-based nylon 6,6 inputs, following an initial investment in their Series A funding round last year.
• Expanding the relationship with Australian startup Samsara Eco via a 10-year offtake agreement to secure recycled nylon and polyester content.
• This Samsara Eco deal is intended to allow the startup to produce nearly one-fifth of the fibers in Lululemon Athletica Inc.'s portfolio by 2035.
• Building on prior work with Geno for plant-based nylon alternatives and utilizing chemicals from LanzaTech created from captured carbon dioxide emissions.

The company reported that 47% of overall fibers were preferred materials between 2020 and 2023, and the internal bet for 2025 is reaching 75% preferred materials, including 75% recycled polyester.

Social impact organizations for lululemon Gives wellbeing programs are central to the company's community investment strategy, which evolved from the Centre for Social Impact to the new lululemon Gives initiative in late 2025. The prior goal was met:

The Centre for Social Impact achieved its goal of providing 10 million people by 2025 with access to wellbeing resources, building on a previous $75 million USD investment over the past five years. The new lululemon Gives program has a goal to equip 20 million people globally by 2030, supported by a planned contribution of $100 million USD in funding through 2030.

The 2025 Community Wellbeing Grant cohort highlights the direct partnership impact:

• 100 inspiring community-led non-profit organizations were selected for the 2025 cohort.
• These organizations collectively received more than $4 million USD in grants.
• The average grant amount for this cohort was $43,000 USD.
• This funding is set to positively impact over 500,000 individuals globally in 2025 alone.
• Past partnerships, including with UNICEF, NAMI, and The Trevor Project, enabled access to mental health support for over 3 million people.

The scale of these social partnerships is a key part of the brand's strategy, which reported Q2 2025 net revenue of $2.5 billion.

Finance: draft 13-week cash view by Friday.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Key Activities

You're looking at the core actions Lululemon Athletica Inc. takes to keep its premium athletic apparel business moving forward as of late 2025. It's a mix of high-touch physical presence and deep product science, all while navigating some tricky inventory levels.

Product R&D and Technical Innovation (Science of Feel platform)

The foundation of Lululemon Athletica Inc.'s value is its commitment to technical innovation, guided by the Science of Feel design philosophy. This focus is non-negotiable, emphasizing both technical performance and comfort in everything they make. This activity is a constant investment area, even when facing macro pressures.

The company continues to innovate across its core categories-Yoga, Run, Train, and On the Move-while also testing new areas like footwear, which launched previously. The focus on newness is a direct response to market softness, especially in the core U.S. market.

Here are some recent product-related data points:

• Men's revenue increased by 6% in Q2 2025 versus the prior year.
• Women's revenue increased by 5% in Q2 2025 versus the prior year.
• Accessories and Other revenue grew by 15% in Q2 2025.
• New product lines like the Glow Up tight and Daydrift trouser were introduced to drive engagement.

The investment in this area is baked into the full-year 2025 guidance, contributing to an expected operating margin deleverage of approximately 390 basis points versus 2024.

Global Retail Expansion (opening 40 to 45 net new stores in 2025)

Physical retail remains a crucial Key Activity, acting as community hubs and brand engagement centers. The expansion strategy is heavily weighted toward international markets, a core pillar of the Power of Three x2 growth plan.

The plan for 2025 was aggressive, targeting 40 to 45 net new stores for the full year. This is supported by a goal to grow total square footage by approximately 10% in 2025.

Here's how the store footprint looked through the second quarter of fiscal 2025:

Metric	Q2 2024 Value	Q2 2025 Value	Change/Notes
Total Company-Operated Stores	721	784	Ended Q2 2025 with 784 stores.
Net New Stores Added in Quarter	N/A (56 added in all of 2024)	14	Added 5 in Americas, 5 in China Mainland, 4 in Rest of World.
Store Optimizations Planned (Q3 2025)	N/A	18	Part of the ongoing strategy to enhance existing locations.

International growth is outpacing the core Americas market; in Q2 2025, International net revenue grew 22% (or 20% constant dollar), while Americas net revenue grew only 1%.

Omni-channel Integration and Digital Platform Management

Lululemon Athletica Inc. maintains an omni view, meaning they invest in both the physical store fleet and digital capabilities to meet guests wherever they shop. Digital is a significant revenue driver, though its growth rate has moderated.

The digital channel contributed $1 billion to the topline in Q2 2025, representing 39% of total net revenue for that quarter. This is a slight step back from the 50% contribution seen in Q4 2024 ($1.8 billion in digital revenue for that quarter).

The company is still executing against the goal to double digital revenues by 2026 from the 2021 baseline.

Key financial context for the full year 2025 outlook:

• Full Year 2025 Net Revenue Guidance Range: $10.850 billion to $11.000 billion.
• Full Year 2025 Expected Growth (ex-53rd week): 2% to 4%.
• Q3 2025 Net Revenue Expectation Range: $2.470 billion to $2.500 billion.

Digital growth is a key component of the overall strategy, even as the company focuses on driving traffic back into stores.

Inventory Management and Supply Chain Agility (critical focus in 2025)

Inventory management became a critical focus area in 2025, evidenced by significant increases in on-hand stock despite moderating revenue growth. Agility here directly impacts gross margin.

The balance sheet at the end of Q2 2025 showed inventories at $1.7 billion, a substantial year-over-year increase of 21% in dollar terms compared to $1.4 billion at the end of Q2 2024. On a unit basis, inventory only increased by 13%, suggesting that higher input costs, like tariffs, are inflating the dollar value.

The Inventory-to-Revenue ratio for the quarter ending July 2025 was 0.67, and the trailing Inventory Turnover Ratio stood at 2.326, with Days of Inventory Outstanding around 156.9 days. These figures signal a need for tighter control to avoid markdowns.

Supply chain costs are directly hitting profitability:

• Gross margin for Q2 2025 was 58.5%, a decrease of 110 basis points year-over-year.
• The gross margin decrease was driven by higher markdowns (up 60 basis points versus expectations) and tariff impacts.
• For Q3 2025, the expected gross margin decrease is approximately 410 basis points relative to Q3 2024, with tariffs and de minimis removal accounting for about 230 basis points of that pressure.

The company is actively managing this by repurchasing stock; they bought back 1.1 million shares for a cost of $278.5 million in Q2 2025.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Key Resources

You're looking at the core assets that let Lululemon Athletica Inc. command its premium position. Honestly, it's more than just the clothes; it's the intangible value built over decades.

Strong, premium brand equity and high pricing power is definitely a top resource. This is reflected in the financial performance metrics, even with recent market softness. For fiscal 2025, the company guided for net revenue between $10.850 billion and $11.000 billion, and reported a gross margin of 59.2 percent for the full fiscal year. To put that margin in perspective, the gross margin for the second quarter of 2025 specifically was 58.5%. The market has been pricing this premium with a forward Price-to-Earnings ratio hovering around 13.5x to 13.9x based on guidance, though some late-year analysis saw it drop to 11.3 times. The operational excellence supporting this is clear in the return metrics, with Return on Equity at 42% and Return on Invested Capital at 43.5% for fiscal 2025.

The next layer is the protection around its innovation. Lululemon Athletica has built a significant intellectual property moat. They hold a total of 925 patents globally, with 661 of those already granted. Specifically related to product aesthetics, the company owns 255 design patents. This IP portfolio guards the proprietary fabric technology that underpins the value proposition. You see this in the names of their core materials, like Luon, Nulu (famously in the Align Pant), Warpstreme (used in the ABC pant), and Evonaturals.

The physical footprint is substantial and strategically managed. Lululemon Athletica's global retail presence is a key tangible asset. As of the second quarter of fiscal 2025, the company operated 784 company-operated stores. This is part of a plan to open between 40 to 45 net new stores throughout 2025. The U.S. market alone accounts for over 550 locations.

Here's a quick breakdown of the store count as of mid-2025:

Metric	Value (Late 2025)
Total Company-Operated Stores (Q2 2025 End)	784
Planned Net New Stores for 2025	40 to 45
U.S. Store Count (Approximate)	Over 550
Total Global Patents	925

Finally, the human element drives the in-store experience. The staff, known as 'Educators,' are critical for community building and translating the brand's premium feel. The internal health supporting this resource appears strong, with an average employee rating of 82 out of 100, placing the company in the 91st percentile compared to industry peers. This culture is recognized externally, too; Lululemon Athletica was named #36 on TIME's World's Best Companies list for 2025.

You can see the tangible and intangible assets that support the premium pricing power:

• Proprietary Fabrics Protected: Trademarks on names like Luon, Nulu, and Luxtreme.
• Design Protection: Ownership of 255 design patents globally.
• Employee Sentiment: Average employee rating of 82/100.
• Retail Scale: Reaching 784 locations globally by Q2 2025.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Value Propositions

You're looking at the core reasons why Lululemon Athletica Inc. commands its price point and keeps customers coming back. It's not just about the leggings; it's about the entire ecosystem built around high-performance gear and a specific lifestyle.

Technical, high-quality apparel for performance and versatility

Lululemon Athletica Inc. delivers technical apparel, which is the foundation of its premium positioning. The brand is recognized for innovative fabric technology, like its signature material, "Luon," which sets a high bar for quality and performance compared to rivals. This focus on technical superiority helps justify the price tag you see on the shelf.

The product development pipeline is geared toward keeping the offering fresh and versatile. For instance, management is actively increasing the share of new styles from 23% to roughly 35% by spring 2026, signaling a push to maintain relevance beyond core franchises. Performance categories, including yoga, run, train, golf, and tennis, are still key drivers of growth.

Exclusive community membership and lifestyle affiliation

The brand successfully translates its product quality into a lifestyle affiliation through its community structure. This is a major differentiator against competitors who often rely on mass-market appeal. The Lululemon Membership program has grown substantially, reaching nearly 30 million members as of late 2025.

This community focus is also tied to social impact goals. Lululemon Athletica Inc. announced in May 2025 that its Centre for Social Impact achieved its goal of providing 10 million people by 2025 with access to resources and experiences that improve physical, mental, and social wellbeing. Furthermore, a 2030 commitment is set to reach 20 million participants through wellbeing programes.

Premium, durable products justifying the high-price model

The premium pricing strategy is directly linked to the perceived value and the target customer's financial capacity. The estimated average household income for a Lululemon Athletica Inc. customer is around $100,000 or more per annum. This segment is willing to pay for quality, which is why the company historically maintains a 'no discount strategy' on much of its core inventory.

Financial results from the first half of fiscal 2025 show the premium model is holding, though under pressure. For the second quarter of fiscal 2025, the reported gross margin was 58.5%. Even with margin pressures noted in Q1 2025, the gross margin was 58.3%. The inventory level at the end of Q2 2025 stood at $1.7 billion, a 21% increase year-over-year, which management must balance with demand to protect the premium perception.

Metric	Value (Latest Reported)	Context/Period
Average Customer Household Income	$100,000+	Estimated (2025)
Women's Pants Starting Price Point (Example)	Over $98	General Product Pricing
Gross Margin	58.5%	Q2 Fiscal 2025
Total Inventory Value	$1.7 billion	End of Q2 Fiscal 2025

Commitment to sustainability (Impact Agenda 2030)

Lululemon Athletica Inc.'s commitment to sustainability is formalized under its Impact Agenda 2030, focusing on climate action and circular innovation. The company has already seen success in prior goals, nearly doubling the percentage of products made with at least 25% preferred materials between 2020 and 2024, achieving its recycled polyester target ahead of schedule.

The forward-looking 2030 targets are concrete and measurable:

• Ensure 90% of products contain at least 25% preferred materials by weight.
• Maintain 60% absolute reduction in Scope 1 and 2 GHG emissions from a 2018 baseline.
• Achieve 60% intensity reduction in Scope 3 GHG emissions from a 2018 baseline.
• Source 50% of electricity consumed by core Tier 1 & Tier 2 suppliers as renewable by 2030.
• Offer product repair or resale opportunities in 90% of global markets.

On the social side, the company committed to investing $75 million USD to advance equity in wellbeing in its global and local communities by 2025.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Customer Relationships

You're looking at how Lululemon Athletica Inc. keeps its high-value customers engaged beyond the transaction. It's all about creating a lifestyle ecosystem, not just selling gear. This relationship strategy is key to their premium positioning, especially when the broader U.S. activewear sector faces softer demand.

High-touch, personalized service through in-store Educators

The in-store experience is built around the Educator role, which is the foundation of their success in retail stores. Educators are tasked with creating world-class customer service by engaging and connecting with guests, sharing top-quality product education, and speaking authentically about the community and culture. They assess guest needs to provide customized, effective purchase and return solutions. This high-touch approach is designed to value the guest's time while ensuring a seamless end-to-end experience, including executing omnichannel programs like buy online/pickup in store.

• Educators are experts in sharing technical product education, articulating the value and benefit of the product.
• They dynamically cover the floor to continuously engage with guests and attend to store needs.
• The role emphasizes creating an equitable, inclusive, and growth-focused environment.

Two-tiered loyalty and membership program for retention

Lululemon Membership is structured to reward frequency and spend, which is critical when management noted a slowdown in purchase frequency from higher-value customers due to product assortment issues. As of late 2025, membership has expanded to nearly 30 million guests across all age groups. Status is determined by yearly spend between January 1 and December 31, and a new level achieved in 2025 grants benefits through the end of 2026.

Here's how the two primary tiers stack up based on the structure that evolved from earlier premium tests, which previously saw annual fees around $100 to $128:

Membership Tier	Annual Cost Structure	Key Differentiating Benefits
Collective	Free	Early Access to Product Drops, Receipt-Free Returns, Free Hemming
Collective Plus	Spend-based qualification (e.g., minimum spend in 2025)	All Collective benefits, plus Exclusive Access to Products, Personal Shopper (launching early 2026)

The strategy here is clear: transactional benefits like free hemming are table stakes; the real differentiation comes from experiential benefits that keep customers emotionally engaged.

Community events and free in-store fitness classes

Community connection is a core driver of loyalty, with research indicating that approximately 65% of Lululemon customers feel more connected to the brand because of its community-driven events. Furthermore, 40% of customers engage with brand ambassadors through these events and social media touchpoints. The company continues to invest heavily in this area through its global impact initiative, lululemon Gives, which evolved from the Centre for Social Impact.

The scope of this community support is significant:

• Lululemon Gives aims to provide 20 million participants with experiences to advance wellbeing (mental health, movement, mindfulness) by 2030.
• The 2025 Community Wellbeing Grant cohort included 100 community-led nonprofit organizations.
• These 2025 grantees received a total of more than $4 million in funding, with an average grant amount of approximately $43,000.

Circularity initiatives like the lululemon Like New resale program

The lululemon Like New branded resale and trade-in initiative directly engages customers beyond the initial purchase, strengthening lifetime value and supporting sustainability goals. By mid-2023, the program had already circulated over 1.7 million apparel items, diverting significant volume from landfills. This circular model captures value from the secondary market.

Financially and environmentally, the commitment is structured as follows:

Metric	Value/Commitment
Items Circulated (by mid-2023)	Over 1.7 million
Profit Allocation (Since 2022)	100% of Like New profits or 2% of Like New revenue, whichever is higher
Beneficiary of Profits	Apparel Impact Institute's Fashion Climate Fund

Finance: draft 13-week cash view by Friday.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Channels

The distribution of product and brand experience for Lululemon Athletica Inc. centers on a carefully managed omni-channel approach, heavily weighted toward its owned retail footprint.

Company-operated physical retail stores (primary brand experience).

The physical store fleet serves as the core touchpoint for community engagement and brand immersion. As of the end of the second quarter of fiscal 2025, Lululemon Athletica Inc. operated a total of 784 company-operated stores globally. This represented a net addition of 14 stores during that quarter alone, with 5 net new stores opened in the Americas, 5 in China Mainland, and 4 in Rest of World. To give you a sense of the core market density, as of October 28, 2025, there were 475 Lululemon stores in the United States. California held the largest concentration with 67 stores, representing about 14% of the US total. The company had planned to expand its overall global square footage by about 10% in fiscal 2025. Store channel sales increased by 13% on a constant dollar basis in the fourth quarter of 2024. You can see the store count progression here:

Metric	Q1 2025 End	Q2 2025 End	Net Change Q2 2025
Total Company-Operated Stores	770	784	+14
Americas Net New Stores (Q2 2025)	N/A (3 net added in Q1)	5	N/A
China Mainland Net New Stores (Q2 2025)	N/A	5	N/A

Direct-to-Consumer e-commerce platform (key growth pillar).

The digital channel remains a vital engine for growth and reach. In the fourth quarter of 2024, digital channel revenue contributed $1.8 billion to the top line. This digital contribution represented 50% of the total revenue for that period. International comparable sales, which include e-commerce, showed significant strength, increasing by 6% in the first quarter of fiscal 2025. Digital engagement is crucial, as evidenced by the 1% increase in overall comparable sales (which combines store and e-commerce) in Q1 2025.

Strategic international store openings (e.g., Italy, Spain, China Mainland).

International expansion is a central focus of the Power of Three x2 growth plan, aiming to quadruple international revenue from 2021 levels by the end of 2026. The company planned to open 40 to 45 net new stores in 2025, with the majority slated for China Mainland. Lululemon Athletica Inc. executed a significant market entry in Italy, opening its first store in Milan on July 19, 2025. This Milan location spans approximately 5,700 square feet across two floors. The brand already has an established presence in several key European markets, including:

• United Kingdom
• Ireland
• Germany
• France
• Spain (where two stores and a dedicated e-commerce site launched in September 2022)
• The Netherlands
• Norway
• Sweden
• Switzerland

China Mainland demonstrated robust performance in Q2 2025, with net revenue increasing 25% year-over-year, contributing $392.9 million, or 16% of total net revenue. The Americas region, while still the largest segment, accounted for 70% of total net revenue at $1.8 billion in Q2 2025.

Limited-distribution showrooms and outlet stores.

Lululemon Athletica Inc. uses specific formats to manage inventory and engage different guest segments. The company utilizes outlets to offer slower-moving inventory and prior season items at discounted prices. As of February 2, 2025, Lululemon Athletica Inc. operated 52 outlet locations, with the majority situated in the Americas. The company also has a re-commerce program called Like New, which allows guests to exchange used products for merchandise credit. Finance: draft 13-week cash view by Friday.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Customer Segments

You're looking at the core groups Lululemon Athletica Inc. is targeting right now, which is key to understanding their near-term financial performance. The brand has successfully moved beyond its initial niche, but the high-income, health-focused consumer remains central.

The typical Lululemon customer is affluent, with an estimated household income of $100,000 or more annually. These are educated professionals who integrate wellness into their daily routines and are willing to pay a premium for quality and design. This focus on the high-end market supports their premium pricing structure.

Historically, the core female yoga and training market has been the bedrock of the business. Women have represented approximately 70% of their customer base. To give you a sense of scale, in 2023, sales of women's products generated $6.14 billion in net income.

The men's apparel segment is a major growth driver under the current strategy. Lululemon Athletica Inc. has a stated goal to double its men's business revenue by 2026, relative to 2021 levels. As of 2023, men's products accounted for $2.2 billion in sales, and they represent about 25% of the overall customer base, showing significant runway for growth in this area.

International guests, particularly in China Mainland, are crucial for the next phase of growth. Management had forecast revenues in China Mainland to grow between 25% to 30% for fiscal 2025 on its last earnings call. This focus is evident in the store expansion plan, aiming for 200 stores in China, with 154 outlets open as of the first quarter of fiscal 2025. For context, in the fiscal first quarter of 2025, net revenue on the Chinese mainland rose 22% in constant currency.

Here's a quick look at some of the segment-relevant numbers as of late 2025 projections and recent actuals:

Customer Segment Focus	Key Metric/Data Point	Value/Amount
Affluent Consumers	Estimated Annual Household Income	$100,000 or more
Core Female Market (Historical Base)	Approximate Percentage of Customer Base	70%
Men's Apparel Segment	2023 Revenue Contribution	$2.2 billion
Men's Apparel Segment	2026 Goal (vs. 2021)	Double Revenue
China Mainland Guests (FY2025 Forecast)	Expected Revenue Growth Rate	25% to 30%
China Mainland Guests (Q1 FY2025 Actual)	Revenue Growth (Constant Currency)	22%
China Mainland Guests (Store Count)	Target Store Count / Q1 FY2025 Actual	200 / 154

You can see the brand is balancing its high-value core with aggressive international and men's expansion. Still, sustaining that high-income consumer loyalty while scaling rapidly in new markets like China is the near-term risk to watch.

The primary customer groups Lululemon Athletica Inc. serves include:

• Affluent Wellness Enthusiasts: Consumers with high disposable income prioritizing fitness.
• Core Female Yogis/Trainers: The historical base, still representing the majority of sales.
• Expanding Male Customer Base: Men actively targeted for significant revenue doubling by 2026.
• High-Growth International Guests: Focused heavily on Mainland China for international expansion.

For the full fiscal year 2025, the company is projecting total net revenue between $11.15 billion and $11.3 billion, which represents a 5% to 7% increase over 2024. This shows the overall revenue growth is expected to moderate compared to the explosive growth seen in specific international pockets, like the 19% growth in international markets during Q1 2025.

Finance: draft 13-week cash view by Friday.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Cost Structure

You're looking at the cost side of Lululemon Athletica Inc.'s operations as of late 2025, and honestly, the numbers show a clear tension between growth investment and external pressures. Here's the quick math on where the money is going and what's squeezing the margins.

Cost of Goods Sold (COGS) (pressured by tariffs and markdowns, gross margin down 300 bps)

The cost of the product itself is facing significant headwinds, primarily from trade policy and the need to move older stock. In the second quarter of fiscal 2025, the gross margin contracted by 110 basis points year-over-year, landing at 58.5%. This pressure is structural, with management now projecting a full-year 2025 gross margin decline of 300 bps versus prior expectations.

The primary drivers for this margin erosion are clear:

• Tariffs and the removal of the de minimis exemption are expected to cause a 220 basis point hit to gross margin for the full year 2025.
• This tariff impact is estimated to translate to approximately $240 million in incremental annual expenses.
• In Q2 2025 specifically, markdowns alone accounted for 60 bps of the gross margin pressure.

To be fair, the third quarter showed some stabilization, with gross margin improving 40 basis points to 58.5% compared to an adjusted 58.1% in Q3 2023, and markdowns were flat year-over-year for that period. Still, the overall 2025 outlook reflects the ongoing fight against these costs.

Selling, General, and Administrative (SG&A) expenses (store staff, marketing)

SG&A expenses reflect continued investment in the store footprint and brand building, even as the revenue growth rate slows. In Q2 2025, SG&A expenses hit $951.7 million, representing 37.7% of net revenue, which was an increase from 36.8% of net revenue (or $872.0 million) in Q2 2024. This resulted in a 90 basis point deleverage in Q2 2025.

By the third quarter, the SG&A rate was approximately 38% of net revenue (or about $910 million), slightly better than the guidance for a 40 to 50 basis point deleverage. Marketing spend is being maintained in the 4.5-5.5% of sales range to support long-term brand building.

Inventory holding costs (inventory up 21% to $1.7 billion in Q2 2025)

Inventory levels are definitely a cost factor you need to watch closely. At the end of Q2 2025, inventories swelled to $1.7 billion, a 21% increase from the $1.4 billion held at the end of Q2 2024. What this estimate hides is that the unit inventory increase was only 13%, meaning higher costs, like tariffs, contributed to the dollar value increase. The sheer volume of stock, especially with softer U.S. demand, flags potential future markdowns, which is a direct hit to gross margin.

Here is a snapshot of the recent balance sheet and investment figures:

Metric	Q2 2025 Value	Q3 2025 Value	Comparison Point
Inventory Value	$1.7 billion	Not explicitly stated for Q3 end	Up 21% YoY in Q2
SG&A Expenses	$951.7 million	Approx. $910 million	Q2 2024: $872.0 million
Capital Expenditures (CapEx)	$177.9 million	Approx. $178 million	Q2 2024: $145.1 million

Capital expenditures for new store build-outs and digital infrastructure

Lululemon Athletica Inc. is actively spending capital to support its physical and digital expansion. Capital expenditures in Q2 2025 were $177.9 million, up from $145.1 million in Q2 2024, primarily due to the timing of new store openings. Similarly, Q3 2025 CapEx was approximately $178 million, an increase from about $163 million in Q3 2024. For the full fiscal year 2025, the company now expects CapEx to land between $700 million to $720 million, a slight reduction from the prior estimate of $740 million to $760 million.

The store count reflects this investment: as of August 2025, the company operated 476 stores in the United States, with nearly 130 in China Mainland.

Finance: draft 13-week cash view by Friday.

Lululemon Athletica Inc. (LULU) - Canvas Business Model: Revenue Streams

You're looking at the top-line expectations for Lululemon Athletica Inc. as of late 2025, and the guidance reflects a slight moderation from earlier projections. For the full fiscal year 2025, the Company now expects net revenue to land in the range of $10.850 billion to $11.000 billion. This range represents growth of 2% to 4% compared to fiscal 2024, or 4% to 6% when you exclude the impact of the 53rd week in 2024. For context, the second quarter of 2025 saw net revenue reach $2.5 billion, with a reported gross margin of 58.5%.

The core of Lululemon Athletica Inc.'s revenue generation remains its direct-to-consumer (DTC) channel, which encompasses both physical stores and e-commerce. This channel has historically been the primary driver. For instance, in fiscal 2023, DTC accounted for 49% of total revenues, totaling $4.7 Bil. By the fourth quarter of 2024, the digital channel alone contributed $1.8 billion, making up 50% of that quarter's total revenue. The physical footprint continues to expand; at the end of the second quarter of 2025, Lululemon Athletica Inc. operated 784 company-operated stores, up from 770 at the end of the first quarter of 2025.

Here's a look at the most granular channel revenue data available for the fourth quarter of fiscal 2025, showing the relative size of the DTC components:

Revenue Stream Segment	Q4 Fiscal 2025 Revenue Amount
Company-Operated Stores	$1.07 billion
E-Commerce	$905.79 million
Other (Wholesale, Franchise, etc.)	$232.58 million

Sales from the core women's apparel and accessories categories remain foundational, though the growth narrative is increasingly focused on diversification. In the first quarter of 2025, women's revenue grew by 7%, while accessories also saw an 8% increase. Still, the strategic push into other areas is clear, as men's revenue grew by 8% in that same period, signaling a successful effort to shift perception away from being solely a women's brand. The company is actively investing in new categories to broaden this base.

The growth from men's and new categories is a key lever for future revenue, building on long-term goals. Management has previously stated an ambition to double the men's business and double digital revenue by 2026. New areas of focus that contribute to revenue growth include:

• Footwear expansion.
• Entry into specialized sports like golf and tennis.
• Continued international expansion, with China mainland revenue expected to grow between 20% to 25% for the full year 2025.

A potentially new, though less quantified, revenue stream involves membership fees. Lululemon Athletica Inc. operates a free loyalty program called the "essential membership," which offers shopping benefits and access to monthly events and experiences. While the primary financial benefit of this program is driving repeat purchases through the DTC channels, the structure suggests a pathway for future premium or subscription-based offerings, similar to models seen in adjacent fitness technology spaces, which could materialize as a distinct revenue line item going forward.