Athletic wear brand lululemon athletica reported higher than expected earnings, while offering weak guidance for 2026.
For the fourth quarter of 2025, the company reported earnings per share of US$5.01, surpassing the $4.78 expected. It also reported net earnings of $586.9 million.
However, this fell short of last year’s $748.4 million and $6.14 per share.
Revenue for the athleisure brand came in at $3.64 billion, rising 1% from the same time last year and beating expectations of $3.58 billion.
"We are pleased to achieve fourth quarter revenue and EPS results ahead of our expectations,” Interim CEO and chief financial officer Meghan Frank said.
After raising guidance for its fourth quarter during the IRC conference in Orlando, all eyes were on the company’s 2026 guidance after a year of underperformance.
Despite this, both the guidance for the current quarter and fiscal year came in lower than expected on the top and bottom lines.
For its first quarter, the company expects revenue between $2.4 billion and $2.43 billion, representing growth between 1% to 3%.
This was lower than LSEG estimates of $2.47 billion.
Lululemon also anticipates earnings per share of between $1.63 and $ 1.68, below estimates of $2.07.
For the full year, the company estimates revenue will grow between 2% to 4% and be between $11.35 billion and $11.5 billion. This is lower than the expectations of $11.52 billion.
Earnings guidance of $12.10 to $12.30 per share was also far weaker than estimates of $12.58.
The retailer, always considered a premium brand that rarely offered promotions, had been leaning on discounts to drive sales and move inventory.
The company is now working to pull back that strategy this year, Frank said.
Lululemon expects the move will weigh on sales in the near term, but it will bring the company back to a full-price business over time, she said.
The weak guidance also comes as the company feels the strain of higher tariffs and the end of the de minimis exemption.
The company expects tariffs to cost it $380 million, up from $275 million last year, on a gross basis.
Once mitigation efforts are taken into account, the net impact is expected to be $220 million in 2026, up from $213 million in 2025.
The brand is trying to negotiate with suppliers and taking other actions to reduce its exposure to tariffs, but isn’t looking to offload costs onto consumers.
Lululemon (NASDAQ: LULU) stock fell 0.4% to $159.27 during Tuesday's U.S. session, and slipped a further 0.7% in after-hours trade. The company’s market cap is $19.5 billion.
