The worst might be behind the luxury yoga clothing brand, Lululemon. After posting results for the fiscal third quarter, LULU stock jumped by nearly 10%. Investors bet that the exit of the chief executive officer is a positive catalyst.
In Q3, Lululemon reported GAAP EPS of $2.59 on revenue of $2.56 billion (+6.7% Y/Y). In addition to beating estimates, markets did not expect it to raise Q4 guidance. In Q4, the firm expects net revenue of up to $3.585 billion, above consensus estimates. It now expects Mainland China to achieve growth of 20% to 25%. Growth in the rest of the world is now in the high teens.
Analysts are still cautious. They are fearful that soft demand in the U.S., the impact of tariffs, and unfavorable product refresh timelines will hurt margins. Still, management is confident. Thanks to new leadership, Lululemon should capture growth in its core markets globally.
Risks
LULU stock has a high risk of post-earnings selling pressure. The company does not yet have a new CEO in place. It hired an executive search firm. The current CEO will not exit his position until January 2026. By then, economic conditions might worsen. That could pressure the management team to lower its forecast despite having just issued a strong one.
