Lululemon Athletica (LULU) Stock Forecast & Price Target

Lululemon Athletica is projected to achieve total sales of $2.496 billion, reflecting a year-over-year increase of 4.2%, with significant growth in comparable sales within its core international markets, particularly a remarkable 33% growth in total international sales driven by robust demand in China. The company reported total sales growth of 7.1% to $2.566 billion, surpassing both consensus expectations and guidance, while managing to limit gross margin contraction to 290 basis points, which was notably better than anticipated. Additionally, the improvement in revenue streams from the Rest of the World and a 46% year-over-year increase in revenues from Mainland China indicates a successful strategy in expanding its global footprint and appealing to diverse consumer bases.

Lululemon Athletica is facing significant financial headwinds, with an expected contraction of approximately 580 basis points in gross margins year-over-year due to increased tariffs, the removal of the de minimis exemption, and fixed cost deleverage. Additionally, the company's operating margin is projected to decrease by 390 basis points for the year, which is markedly worse than the previously anticipated decline of 160 basis points. Expectations for operating margins in 2026 remain pessimistic, with management forecasting around 680 basis points of contraction attributed to ongoing tariff impacts and reinvestment in compensation.