lululemon Banks on China: Can It Deliver Growth in Fiscal 2025?

lululemon athletica inc. LULU is a globally recognized brand specializing in athletic footwear, apparel and sports equipment. LULU views China as a cornerstone of its international growth strategy. The company is rapidly enhancing its foothold in China by introducing stores and increasing brand visibility.

Under its Power of Three x2 strategy, lululemon aims to reach 200 stores in China, with nearly 154 outlets as of the first quarter of fiscal 2025. Beyond store expansion, LULU has been hosting events focused on deepening guest engagement, as well as capitalizing on traditional media assets and brand ambassadors to drive product launches and brand equity. Digitally, the brand taps into platforms like Tmall, WeChat, and Douyin to expand reach and broaden consumer engagement.

In the fiscal first quarter, revenues in Mainland China rose 22% in constant currency, notwithstanding a four-point headwind from the Chinese New Year calendar shift. Comparable sales advanced 8% in the region in the same period. The company is in the early stages of its international journey and remains committed to expanding in China, its key growth market. 

On its last earnings call, management had forecast revenues to grow 25-30% in the China Mainland for fiscal 2025. Its unique and innovative offerings in athletic and lifestyle product categories are expected to fuel success. However, tariff implications may hinder growth as management assumed rates include 30% incremental tariffs on China.

Nevertheless, lululemon is adopting mitigating strategies, including tightly managing expenses, driving efficiencies across its supply chain and evaluating pricing. In a nutshell, China is a key growth engine for the company, with expansion in localization, digitization and community engagement.

LULU’s Competition in China

adidas AG ADDYY and NIKE, Inc. NKE are the key companies competing with lululemon in China.

adidas is another sporting goods giant vying for a larger share of the Chinese market. The company is aggressively focused on expanding its presence in China by launching locally relevant product lines and enhancing its brand equity via collaborations and marketing campaigns. Amid a highly evolving geopolitical and macroeconomic environment, adidas has been diversifying its supply chain and adopting mitigating strategies. Initiatives like the “Future City Concept” stores highlight adidas’ ongoing commitment to forward retail strategy. Such strategies are likely to offer resilience and sustainability in the long term.

NIKE has a solid presence in China, which is central to its global growth strategy. The company has strategically invested in China to reinforce its consumer engagement and gain competitive leverage. NIKE’s China business, which is commonly referred to as Greater China, delivered revenues of $1.5 billion in fourth-quarter fiscal 2025, which fell 20% on a currency-neutral basis. Greater China has remained a challenging market, marked by a difficult operating environment and tariff-related headwinds. It noted that the holiday order book is up year over year for fiscal 2026, with growth in North America, EMEA and APLA, partially offset by Greater China.

LULU’s Price Performance, Valuation and Estimates

Shares of lululemon have lost 48% year to date compared with the industry’s decline of 25.2%.

From a valuation standpoint, LULU trades at a forward price-to-earnings ratio of 13.41X compared with the industry’s average of 11.46X.

The Zacks Consensus Estimate for LULU’s fiscal 2025 earnings implies a year-over-year dip of 2.3% while that of fiscal 2026 shows growth of 7.3%, respectively. The company’s EPS estimate for fiscal 2025 and fiscal 2026 has moved down in the past 30 days.

lululemon stock 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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