On December 11 (Eastern Time), Vancouver-headquartered Canadian athletic lifestyle brand Lululemon Athletica Inc. (Nasdaq: LULU) released its financial results for the third quarter of fiscal year 2025, ended November 2, 2025. Behind a global net revenue increase of 7% year-over-year to USD 2.6 billion lies a sharply polarized market landscape: on one end, U.S. revenue declined by 3% year-over-year, with same-store sales down 5%; on the other, the Chinese Mainland achieved a staggering 46% growth (47% in constant currency), with same-store sales up 25%, making it the undisputed driver of global growth.
During the earnings call following the release of the report, Lululemon’s management not only unpacked the secret to success in the Chinese market but also laid out in detail its reform plans to reverse the downward trend in the U.S. market.
1. Momentum in China: All City Tiers Accelerate, Outerwear Emerges as New Growth Driver
The word “China” was repeatedly mentioned during the earnings call.
Regarding the strong performance in the Chinese market, CEO Calvin McDonald outlined the following growth drivers:
— “We show up as a brand with very little discounting, and a significant portion of our business is full-price.”
— “We have a lower ratio of outlet to full-price stores, and we use these channels as a means of clearing some discounted products. This lever and mix work well in this market.”
— “Our outerwear business has been very successful. This is a very key and important category in this market. We continue to see great guest response to existing styles like the Wunder Puff as well as new innovations like Featherweight and other silhouettes and styles we’ve introduced.”
— “We’ve seen success across all city tiers. And we’re definitely seeing that as we go deeper into Tier 2 and Tier 3 cities, the brand and business continue to resonate and perform well.”
“Overall, we are definitely gaining market share in China. The momentum is strong, and the team on the ground is executing very well.”
Looking ahead, CFO Meghan Frank added, “Our new store openings in 2025 include approximately 15 stores in the Americas, of which 9 are planned in Mexico. The remainder of our new store openings are in our international markets, with the majority in China.”
2. Issues in the U.S.: Product Creation and Activation
Regarding the U.S. market, CEO Calvin McDonald stated: “We continue to see growth in total customers and retained customers, and we are acquiring and retaining guests across all age demographics. Where we need to improve is increasing the frequency of visits and spend among our high-value guests.”
The core issue in the U.S. market lies in product aging and assortment misalignment.
CFO Meghan Frank detailed the action plan framework aimed at revitalizing the U.S. business. Beyond enhancing operational efficiency, the plan rests on two main pillars:
— Product Creation: Speed and Refresh
“We’re working to increase our speed to market. Our core product development timeline currently takes 18 to 24 months, and we are working to reduce that to 12 to 14 months. In addition, we have been building out our quick-turn capabilities. This includes our chase model, which will allow us to reorder selected high-performing styles within 6 to 8 weeks, as well as our rapid design process.“
“Finally, it’s important to remember that the current assortment you’re seeing in stores and online includes some styles that don’t represent the future vision of our brand. There are many elements we like and that our guests have responded well to. However, as we’ve mentioned before, we’ve allowed certain key franchises to run too long in their life cycles. And we haven’t been activating our high-value guests the way we have in the past.“
“We are increasing the frequency and breadth of newness, with new styles projected to make up 35% of the assortment by Spring next year.”
— Product Activation: Localized Store Assortments
“First, we’re enhancing the in-store experience by improving our ability to localize assortments by store and market. In May of this year, we began testing a new in-store experience model at stores in Los Angeles and Miami and saw positive early results. The core of this test was reducing presentation density, optimizing product pairings, and localizing assortments using local data to better highlight core products and improve the shopping experience.“
“Our intent is to apply these learnings to strengthen our localization capabilities across all stores. This strategy goes beyond climate-based segmentation; we’ll be able to maximize our assortments more effectively by tailoring our selection to local guest preferences.”
“By understanding which styles matter most to guests in different regions, we can improve visual merchandising. We are working to improve our in-store storytelling by moving products between adjacent zones and category flows to ensure guests see the diversity and coherence of our offerings.”
| Source: Official Earnings Report, Earnings Call
| Image Credit: Official Website, Luxeplace Historical Coverage
| Editor: LeZhi
