Lululemon Athletica Inc. (NASDAQ:LULU) heads into its third-quarter report with slowing sales growth, a sharp margin squeeze from tariffs and weaker U.S. demand, as investors watch whether a major product “newness” push can reignite momentum, but likely not before 2026.
Telsey Advisory Group analyst Dana Telsey maintains a Market Perform rating on Lululemon Athletica and reiterates a $200 price target, previewing fiscal third-quarter 2025 results due after the close on Thursday, December 11, and focusing on the outlook and assortment commentary.
Telsey models third-quarter 2025 EPS of $2.22, slightly above the Street at $2.21 but down from $2.87 last year, and within company guidance of $2.18–$2.23.
On revenue, Telsey projects $2.496 billion (up 4.2% YoY) versus consensus of $2.477 billion and guidance of $2.47 billion –$2.50 billion, with comps up 1.0% after last year’s 3.0% gain.
The firm closely monitors U.S. traffic and demand trends, particularly in core categories such as lounge and social, as well as any incremental color and newness read-through.
Margin Pressure And Cost Headwinds
Margins remain the key pressure point. Telsey forecasts a gross margin of 54.4%, a 410 bps year-over-year decline, consistent with company expectations, alongside 150 bps of SG&A deleverage to 39.5% of sales. Combined, this implies an operating margin of 14.9%, down 560 bps YoY, near guidance.
Full-Year Outlook And Tariff Impact
For fiscal 2025, Telsey expects sales of about $10.96 billion and EPS of $12.92, aligning with management’s reduced earnings outlook.
Telsey attributes the weaker profitability framework largely to tariffs, including the removal of the de minimis exemption, and expects mitigation actions (pricing, vendor talks, and cost savings) to skew more toward the back half, with incomplete offset likely persisting into fiscal 2026.
Merchandising Reset And Long-Term Strategy
Strategically, Telsey highlights leadership consolidation and a merchandise reset in the U.S., where product life cycles have run too long.
Lululemon aims to raise new styles to 35% of the assortment (from 23%) by spring and expects faster speed-to-market initiatives to show more meaningful benefits in 2026. The $200 target reflects a 14.0x multiple on a two-year forward EPS estimate of $14.30.
LULU Price Action: Lululemon Athletica shares were down 4.27% at $181.90 at the time of publication on Monday, according to Benzinga Pro data.
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