The Lululemon story

What drives the business

• Lululemon's business centers on technical athletic apparel distributed through its own stores and digital channels, with customer feedback feeding product design and women's products accounting for 63% of fiscal 2025 revenue.
• Men's products contributed 24% and accessories and other categories contributed 13% of fiscal 2025 revenue, providing additional avenues for product expansion.
• The Americas accounted for 71% of fiscal 2025 revenue, China Mainland for 16%, and Rest of World for 13%, making the Americas recovery central even as the company expands abroad.
• China Mainland revenue grew 28.9% in fiscal 2025, and Lululemon plans to place most of its fiscal 2026 company-operated store openings there, while its Americas strategy emphasizes new styles and locally tailored assortments.
• The appointment of Heidi O'Neill as CEO effective September 8, 2026, and the May 2026 cooperation agreement with Chip Wilson brought leadership and board changes as the company works to strengthen products, marketing, and performance.

What the price assumes

At $100.58, the reverse DCF implies annual growth of -6.1% in free cash flow after stock pay for ten years, using a 10.2% discount rate.

That assumed contraction contrasts with growth of 23.0% a year over the last 10 years and the TenQ check's 13.5% bar, which slows the historical record halfway toward 4%.

The historical cash growth record also contrasts with revenue growth of 1.7% and profit growth of -20.6% over the last twelve months.

Value LULU on your own assumptions

What could change the story

• Revenue growth of 1.7% over the last twelve months trailed the 6.4% peer benchmark and Lululemon's 11.0% annual pace over the last three years, failing TenQ's peer growth and acceleration checks.
• Operating income decreased 13% in the quarter to August 2026 despite the tariff refunds, showing that the reported gross margin improvement did not translate into stronger operating earnings.
• Additional tariff refunds remain uncertain, and the U.S. operating entity faces consumer class actions concerning alleged tariff-related pricing actions and potential governmental tariff reimbursements.
• International expansion faces differences in consumer preferences, language, culture, and regulation, while negative publicity, recalls, or mishandled marketing events could weaken the brand.
• Supply is concentrated, with five vendors producing 47% of products in fiscal 2025 and no long-term production and supply contracts with most suppliers or manufacturers.

What to watch next

• For the third quarter of fiscal 2026, management expects revenue of $2.290 billion to $2.320 billion, a decline of 10% to 11%, and diluted earnings per share of $0.93 to $0.98.
• For fiscal 2026, management expects revenue of $10.350 billion to $10.500 billion and diluted earnings per share of $9.48 to $9.73, including $0.86 per share from tariff refunds and associated interest but excluding further potential refunds and future share repurchases.
• Americas comparable sales and international comparable sales will indicate whether product and marketing changes are improving demand beyond the contribution from store expansion.
• Gross margin without further refund benefits and inventory trends will help distinguish operating progress from tariff effects, following a 1% inventory decrease to $1.7 billion and a 7% unit decrease at the end of the quarter to August 2026.

Sources

• Lululemon's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The LULU stock report, for every figure and check