Can lululemon's International Growth Offset North America Weakness?

lululemon athletica inc.’s LULU international business remains a key growth driver, with first-quarter fiscal 2025 revenues in the China Mainland growing 22% and Rest of World rising 17%, both in constant currency. LULU remains confident in its international trajectory, reiterating the fiscal 2025 growth targets of 25-30% in China and 20% in other global markets.

Store expansion is a major pillar, evident from its recent store openings in two franchise markets — Denmark and Turkey. It is also on track to enter Italy as a new company-operated market, and to launch in Belgium and the Czech Republic through its franchise model later in fiscal 2025.

However, North America, particularly the United States, is showing signs of consumer caution. Revenues in the United States rose just 2% in the fiscal first quarter, and comparable sales in the Americas fell 1%. The weakness was attributed to softer traffic trends and a more discerning consumer, especially toward core and seasonal products. While Canada posted 9% constant-currency growth, U.S. performance lagged despite market share gains in premium activewear. LULU remains optimistic, pointing to encouraging reactions to product launches like the Align No Line and Daydrift trouser, which are expected to scale in the second half of fiscal 2025.

Whether international strength can fully offset North American softness remains uncertain. lululemon’s balance sheet, gross margin and pricing power give it flexibility, and early wins in overseas markets offer a promising growth hedge. Still, the company’s long-term success hinges on reigniting consistent demand in its core U.S. market while sustaining double-digit international momentum.

Tracking LULU’s Rivals: NKE & GES in US & Global Markets

As lululemon navigates shifting consumer trends and global expansion, its key rivals, NIKE Inc. NKE and Guess?, Inc. GES, are charting their paths across the U.S. and international markets, revealing telling contrasts in strategy and performance.

NIKE faces headwinds in its North America business, as softer wholesale demand and cautious consumer spending pressure growth. To regain momentum, it is emphasizing product innovation, storytelling and renewed wholesale partnerships. Internationally, NIKE is focused on growth in China and EMEA, supported by improving demand and strong digital traction. Compared with lululemon, NIKE has a far broader global footprint, especially in emerging markets, offering greater scale but also increased exposure to macroeconomic and currency-related risks.

Guess is experiencing mixed results across regions, with U.S. sales pressured by softer retail traffic and increased promotions, especially in wholesale. Internationally, led by Europe and parts of Asia, performance remains strong, accounting for most of its revenues. Guess operates in more than 100 countries, with a heavier presence in Europe and Latin America.

However, lululemon is focused on the Asia-Pacific, especially China, creating limited overlap between the two brands in terms of geographic reach and target demographics.

The Zacks Rundown for lululemon

LULU shares have lost 35.9% year to date compared with the industry’s decline of 24.7%.

From a valuation standpoint, lululemon trades at a forward price-to-earnings ratio of 16.33X, significantly higher than the industry’s 11.46X.

The Zacks Consensus Estimate for LULU’s fiscal 2025 earnings implies a year-over-year decline of 1%, whereas the consensus mark for fiscal 2026 suggests growth of 8.3%. Earnings estimates for fiscal 2025 and 2026 have been southbound in the past seven days.

lululemon 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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