Can lululemon's "Power of Three x2" Strategy Still Hit FY26 Targets?

lululemon athletica inc.’s LULU “Power of Three x2” strategy, focused on doubling men’s, digital and international revenues by fiscal 2026, faces a mixed operating backdrop as the company works through U.S. softness while leaning on international momentum. Recent commentary suggests the long-term framework remains intact, but execution risks have risen.

In the third quarter of fiscal 2025, lululemon delivered year-over-year revenue growth of 7%, supported by strength outside North America. International revenues rose 33%, led by China Mainland growth of 46% (47% in constant currency), reinforcing the strategy’s global pillar. Management now expects China revenues to come in at or above the high end of its 20-25% growth forecast for fiscal 2025, underscoring confidence in the brand’s resonance across tiered Chinese cities.

However, the Americas remain a challenge. U.S. revenues declined 3% in the fiscal third quarter, reflecting cautious consumer behavior, higher promotional intensity and longer product life cycles in core franchises. To address this, lululemon is executing a three-pillar action plan centered on product creation, product activation and enterprise efficiency. Key initiatives include lifting new-style penetration to 35% in spring 2026, shortening development timelines, refreshing major franchises like Swiftly and Scuba, and improving localized merchandising and digital storytelling.

Margins are other pressure points. Higher tariffs and markdowns drove a 290-basis-point decline in the gross margin in the fiscal third quarter, and management expects continued margin headwinds into fiscal 2026 despite mitigation efforts.

Overall, while near-term U.S. headwinds and cost pressures complicate the path, lululemon’s accelerating international growth, disciplined balance sheet and product-led reset suggest that the “Power of Three x2” strategy still has a viable runway, with 2026 shaping up as a pivotal proof point rather than a guaranteed outcome.

Are LULU Rivals CROX & RL on Track to Deliver Growth?

As lululemon navigates a shifting demand landscape, investors are closely watching whether rivals Crocs Inc. CROX and Ralph Lauren Corporation RL are executing effectively on their growth strategies to sustain momentum.

Crocs appears largely on track with its growth plans, supported by steady brand demand and disciplined execution. Management highlighted resilient core Crocs brand performance, international expansion and continued traction in personalization, while acknowledging near-term pressures from a cautious consumer and higher promotions. The company reaffirmed its long-term focus on brand-led growth, operational efficiency and selective innovation, positioning CROX to deliver sustainable gains into 2026, even as macro and competitive headwinds persist.

Ralph Lauren remains on track with its “Next Great Chapter: Accelerate” plan, underpinned by strong brand elevation, consumer centricity and operational agility. Digital transformation drives growth, with investments in personalization, mobile, omnichannel and fulfillment enhancing consumer engagement. Retail and wholesale remain key pillars, with flagship stores, premium distribution and partnerships boosting comparable sales across North America, Europe and Asia. While a still-volatile global environment poses near-term risks, RL’s diversified growth levers and operational focus support its ability to deliver against 2026 targets.

The Zacks Rundown for LULU

lululemon’s shares have gained 22.6% in the past three months against the industry’s decline of 0.1%.

From a valuation standpoint, LULU trades at a forward price-to-earnings ratio of 15.97X, lower than the industry’s 16.43X.

The Zacks Consensus Estimate for lululemon’s fiscal 2025 and 2026 earnings implies year-over-year declines of 11% and 0.7%, respectively. Earnings estimates for fiscal 2025 have been northbound in the past seven days, whereas estimates for fiscal 2026 have been southbound in the same period.

LULU currently carries a Zacks Rank #3 (Hold).

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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