Lululemon 2Q25 Immediate Call Postmortem
Down 4% Americas comp despite massive discounting in July is disappointing but we kinda already knew the entire athletic apparel industry is facing issues (that includes signs at FinX favorites Alo and Vuori BTW). Still massively better than all public peers, so market share gains continue given how large those competitors are. Interesting times as increasingly hard to reconcile strength in various footwear silhouettes (such as On Holdings and the Nike “turnaround) with apparel trends moving away from athletic.
The problems with Social and Lounge sound like a straight up problem from chasing after the traditional apparel world. There was a great opportunity to talk more about a potential inflection point in the technical nature of their product as they are now much closer to the lead times of that product post Sun’s departure. But they really didn’t in a meaningful way. New styles that the guest has never seen is not the same thing as technical apparel. Janine kinda asked about this in Q&A and they gave nothing meaningful as an answer.
Calvin said they gained share in performance apparel using Circana data. Am sure that’s true from everything I see and hear industrywide. I know everyone on FinX is kneejerk saying this result must be because Alo (whatever happened to Vuori) but that’s a private company so easy thing to point to without doing any real work. Alo certainly should do an IPO right this minute if they are crushing life as people on social media imply. They were supposed to do one last year! Maybe they will…but every day they don’t is a hole in that thesis.
I hear you bears but if the world was ending at Lululemon then they would have much more pressure from markdowns than the new 50 bps of pressure vs. the prior 15 bps. Amazing how so many professionals don’t understand the concept of shallow buys. Softline analysts continue to think about Lululemon like it’s the same thing as Gap. Let’s not even be that egregious – right now Nike is doing crazy markdowns. Clearly de minimis was a big deal here.
Speaking of, Ike Boruchow at Wells Fargo nailed the de minimis thesis. Most shipments from Canada were under the $800 limit. They fulfill approximately 2/3 of their ecommerce shipments from Canada! If that isn’t worth a #1 II/Extel vote next year than I don’t know what is. Reminds me of when Binetti (Evercore/ISI now) was first to call Under Armour would start using cotton. Don’t worry, I will remind you when voting happens again. Very proud of him. Something you only see like once or twice every few years across all 40+ analysts that cover the industry.
Brooke had a good question. Followed up on the comment about new styles shifting to 35% from 25% in Spring 2026. Slightly over indexes in Social and Lounge. I bet that’s because most that product really doesn’t fall within the realm of technical apparel. Hopefully a good sign that they are serious about shifting back to technical.
Yih asking about how they can chase. They almost certainly can’t if its technical product. Moving quicker than the past is something we have heard from EVERY apparel company for decades now.
Was worried about inventory up 13% but apparently that was “inline” with expectations. Difference was higher tariffs rates and FX. Going to have to dig into that later. Hate that I don’t have that top of mind.
*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. Management has given some topics to dig deeper into and will circle back in several days with a more comprehensive work up as well as detailed scenario analysis of how consensus numbers shook out.
Originally posted on X and Substack.