Is lululemon Women's Category Growth Enough to Offset Margin Strains?

lululemon athletica inc.’s LULU women’s business remains at the core of its brand identity and long-term growth strategy. The company continues to see strong traction across women’s franchises, including Align, Daydrift, Shake It Out and BeCalm, which have resonated well with global consumers. 

Product launches, such as the No Line Align leggings, quickly sold out in limited distribution and are being expanded across stores, reflecting the robust demand that women’s apparel continues to generate. This momentum highlights lululemon’s ability to innovate in performance and lifestyle apparel, sustaining its leadership position in the premium activewear space.

However, lululemon faces mounting margin pressures. Elevated tariffs, particularly in China and other sourcing markets, are weighing heavily on costs. The company expects operating margin contraction in fiscal 2025, with the gross margin facing headwinds from tariffs, higher occupancy and increased SG&A expenses tied to strategic investments and FX losses. While the company is working on mitigation strategies such as modest price increases, supply-chain efficiencies and vendor negotiations, the impacts will be more visible in the back half of fiscal 2025.

The key question is whether women’s growth can offset these headwinds. lululemon’s women’s revenues increased 7% in first-quarter fiscal 2025, showing steady demand despite a cautious consumer backdrop in the United States and broader promotional intensity. Importantly, market share gains in premium women’s activewear demonstrate resilience even as traffic trends soften. While robust women’s growth provides a solid cushion, margin challenges tied to external factors may limit earnings expansion in the near term, making execution of cost controls and pricing actions critical.

Women’s Category Trends — lululemon vs. NIKE & Ralph Lauren

With the women’s category becoming a critical growth engine across premium activewear and lifestyle brands, NIKE Inc. NKE and Ralph Lauren Corporation RL compete head-to-head with lululemon for a share in this space. Each of these companies is leveraging innovation, brand elevation and consumer engagement to capture momentum despite margin headwinds.

NIKE’s women’s business is gaining momentum, highlighted by a more than 50% expansion in basketball and strong consumer response to the latest launches like A’ja Wilson’s signature shoe, which sold out within minutes. The company is deepening engagement with women athletes and expanding distribution through women-led retail doors, signaling a clear strategic focus. While tariffs and margin pressures persist, NIKE’s growing women’s category offers a strong offset, positioning it as a key lever for profitable growth.

Ralph Lauren’s women’s category continues to deliver strong momentum, with double-digit growth in core collections and increasing traction across elevated lifestyle offerings. The brand’s focus on product elevation, reduced discounting, and expansion in Asia and digital channels is helping drive sustainable gains. However, macro headwinds, currency pressures and higher input costs weigh on margins. While women’s growth provides a meaningful cushion, profitability improvements will depend on disciplined pricing, brand elevation and ongoing operational efficiency initiatives.

The Zacks Rundown for LULU

lululemon’s shares have lost 46.8% year to date compared with the industry’s decline of 26.4%.

From a valuation standpoint, LULU trades at a forward price-to-earnings ratio of 13.75X, higher than the industry’s 11.28X.

The Zacks Consensus Estimate for lululemon’s fiscal 2025 earnings implies a year-over-year decline of 2.2%, whereas the consensus mark for fiscal 2026 suggests growth of 7.2%. Earnings estimates for fiscal 2025 and 2026 have been southbound in the past seven days.

LULU currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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