Can lululemon Maintain Its Pricing Power in a Softer Spending Climate?

lululemon athletica inc. LULU enters the back half of fiscal 2025 navigating a far more cautious consumer backdrop, raising the question of whether its long-standing pricing power can withstand the ongoing softer spending environment. The company acknowledges that U.S. shoppers are becoming more selective, spending less on apparel and responding mainly to styles that feel truly new. 

Management highlighted that while international regions remain strong, the U.S. business is facing pressure as key casual franchises like Scuba and Softstreme have grown stale, prompting higher markdowns and weighing on product margins. 

To partially offset rising costs, including sharply higher tariffs and the loss of the de minimis exemption, lululemon is rolling out modest price increases on select styles. Early reads have been positive, though management noted that the brand is proceeding carefully, assessing elasticity item by item.

Pricing remains just one lever among several. The company is also leaning on vendor negotiations, supply-chain efficiencies and disciplined expense management. However, with tariffs expected to drive a 220-basis-point (bps) hit to the gross margin in fiscal 2025, and an even larger $320-million impact in fiscal 2026, the brand must balance margin protection with safeguarding long-term brand equity. 

The ultimate test of pricing power may rest on how quickly lululemon revitalizes its assortment. Management is accelerating design cycles, increasing newness from 23% to 35% next spring, and chasing into winning styles faster thanks to tighter vendor alignment. The company believes that when innovation lands, guests are willing to pay for it, as seen in strong performance categories and positive response to offerings like Align No Line and Daydrift.

Whether this innovation engine can outpace macro softness and justify higher prices will determine how well lululemon defends its premium positioning in fiscal 2026 and beyond.

Is Pricing Power Fueling Gains for LULU’s Competitors: CROX & RL?

As lululemon navigates softer demand and rising costs, rivals Crocs Inc. CROX and Ralph Lauren Corporation RL are leaning on pricing power to protect margins and sustain momentum in an increasingly value-driven marketplace.

Crocs’ ability to hold pricing power is being tested as consumers grow more cautious, yet the company is navigating the softer spending backdrop with selective price increases and disciplined promotional pullbacks. Management emphasized that pricing is set based on brand strength and market dynamics, not simply to offset tariffs, while innovation across Clogs and Sandals supports higher ASPs and consumer engagement. These levers help Crocs protect margins despite meaningful tariff headwinds.

Ralph Lauren’s pricing power appears resilient even as consumers grow more cautious, supported by eight consecutive years of AUR gains and strong full-price sell-through across regions. Management highlighted that AUR growth continues to stem from brand elevation, reduced discounting and favorable mix, not just price hikes, allowing RL to maintain margin strength despite tariff pressures. With broad-based momentum and strong value perception, the company remains confident in sustaining pricing leverage even in a softer spending climate. 

The Zacks Rundown for LULU

lululemon’s shares have gained 11.7% in the past three months against the industry’s decline of 1.1%.

From a valuation standpoint, LULU trades at a forward price-to-earnings ratio of 14.04X, lower than the industry’s 16.22X.

The Zacks Consensus Estimate for lululemon’s fiscal 2025 earnings implies a year-over-year decline of 11.8%, whereas the consensus mark for fiscal 2026 earnings suggests growth of 1.2%. Earnings estimates for fiscal 2025 and 2026 have been northbound in the past seven days. LULU currently carries a Zacks Rank #3 (Hold).

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

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