Lululemon designs premium athletic clothes, footwear, and accessories and sells them through its own stores and website in 30 countries. The company makes money by charging more for its products than ordinary athletic wear costs, relying on proprietary fabrics and a reputation for quality to justify those prices. Women's clothes make up 63% of net revenue, men's 24%, and accessories 13%. Most sales come from the Americas, which generated 71% of total revenue in fiscal 2025. The diagram below traces where the money goes.
How Lululemon Makes Money
flowchart LR
A["Guest Connection
In-Store & Online"] --> B["Product Sales
11.1B Revenue"]
B --> C["Gross Profit
56.6% Margin"]
C --> D["Operating Profit
19.9% Margin"]
D --> E["Reinvestment in
Store Expansion"]
E --> F["New Markets
& Locations"]
F --> A
B --> G["Product Design
& Innovation"]
G --> H["Advanced Fabrics
& Technical Features"]
H --> B
I["Three Revenue Streams
Women 63% Men 24% Accessories 13%"] --> B
J["Omni-Channel Network
Company Stores E-commerce Wholesale"] --> A
F --> J
Revenue has grown steadily over five years, rising from $6.3 billion in fiscal 2022 to $11.1 billion in fiscal 2025. That is a meaningful run. But the most recent year tells a more complicated story. Americas revenue actually fell 1%, dropping from $7.93 billion to $7.85 billion. International markets picked up the slack, with China Mainland growing 29% and Rest of World growing 16%. The company is still growing overall, but the engine that built the business is stalling.
Lululemon Annual Revenue (Fiscal Years 2022 to 2026)
Revenue in billions USD. Growth has continued each year, but the pace slowed sharply in the most recent fiscal year.
Gross margin tells a similar story. It peaked at 59.2% in fiscal 2024 and fell to 56.6% in fiscal 2025. The main culprit is tariffs. The U.S. eliminated a tariff exemption called de minimis, which had let small international shipments enter the country without paying import taxes. Lululemon ships a large portion of its U.S. e-commerce orders from distribution centers in Canada, and many of those orders previously qualified for this exemption. When it disappeared, costs rose. On top of that, most of Lululemon's clothing is made in Vietnam, Cambodia, Sri Lanka, Indonesia, and Bangladesh, all countries now facing higher U.S. tariffs. The company estimates tariffs and de minimis removal cut gross profit by roughly $275 million in fiscal 2025.
$275M
Estimated reduction to gross profit in fiscal 2025 from higher tariffs and removal of the de minimis exemption
Free cash flow has been uneven. It came in at $1.0 billion in fiscal 2022, dropped to $0.3 billion in fiscal 2023, recovered to $1.6 billion in fiscal 2024, held at $1.6 billion in fiscal 2025, then fell to $0.9 billion in fiscal 2026. The company carries no net debt, meaning it has more cash on hand than it owes in borrowings. As of February 1, 2026, it held $1.8 billion in cash. That cushion matters because the business is spending to grow internationally even while its biggest region weakens.
What Is Sales Per Square Foot?
Retailers use this number to measure how productive their store space is. You divide total store revenue by the total square footage of all stores. A falling number means stores are generating less money for every foot of space they occupy. Lululemon's sales per square foot fell from $1,574 in fiscal 2024 to $1,426 in fiscal 2025.
Falling sales per square foot is a warning sign for a retailer that relies on physical stores as its primary growth tool. Lululemon added 44 net new company-operated stores in fiscal 2025, bringing the total to 811 locations. Square footage grew 11%. But revenue per square foot dropped because the stores are not generating as much revenue as before. The company plans to open most new stores in China Mainland in fiscal 2026, betting that international demand can compensate for slowing traffic and lower conversion rates in North America.
$1,574
Sales per sq ft, FY2024
$1,426
Sales per sq ft, FY2025
A drop of $148 per square foot in one year, even as the company opened 44 net new stores.
The company is not standing still. It has laid out a three-part action plan: create better and newer products more quickly, improve how products are presented in stores and online, and cut costs across the business. New product styles like Daydrift, Be Calm, Big Cozy, and Mile Maker launched in fiscal 2025. The company is also trying to revive older popular lines like Scuba and ABC. Digital marketing spending rose by $49 million. None of these moves are guaranteed to reverse the trend, but they reflect a business that recognises the problem.
2025
crisis
Proxy Fight and Leadership Vacuum
In late 2025, the company's founder attempted to take control of the board, citing weak stock performance and pressure from competitors like Alo Yoga and Vuori. The two sides reached a settlement in May 2026, with the company agreeing to add board members with marketing and apparel experience. Separately, the CEO stepped down on January 31, 2026, leaving the company with temporary co-CEOs while a permanent replacement is sought. Two leadership crises at once, while the core Americas business is shrinking, is an unusual amount of turbulence for a company this size.
Beyond tariffs and leadership, the company faces two other concentrated risks worth naming clearly. First, 34% of its fabrics come from Taiwan. Any disruption to Taiwan, whether from trade policy or conflict, could cut off access to the specialized materials Lululemon's products depend on. Second, five manufacturers produced 47% of all products in fiscal 2025, with the single largest making 15%. Losing one of those factories to financial trouble or a change in business terms could leave shelves empty faster than new suppliers could be found.
34%
Share of Lululemon's fabrics sourced from Taiwan, creating a single-country concentration risk
The company remitted $216 million in tariffs under the IEEPA framework in fiscal 2025. A U.S. Supreme Court ruling in February 2026 invalidated those specific tariffs, but the administration immediately imposed new tariffs under different legal authority. The company says the ultimate amount it might recover, if anything, remains uncertain.
China Mainland is the clearest bright spot in the current numbers. Revenue there grew 29% to $1.75 billion, comparable sales grew 20%, and the segment operating margin reached 40%. The company plans to open more new stores in China Mainland in fiscal 2026 than anywhere else. But China growth comes with its own concentration risk. If economic conditions shift there, or if local competitors gain ground, the international engine that is currently compensating for Americas weakness could slow as well.
40%
China Mainland segment operating margin in fiscal 2025, the highest of any segment
The Bet
Lululemon's financial logic requires that its brand stays strong enough in North America to stabilise, and eventually grow, the Americas segment while international expansion matures. The company has no long-term contracts with most of its manufacturers, no guarantee that new product launches will reignite demand, and no confirmed permanent CEO. If Americas comparable sales continue to decline while tariff costs remain elevated, the international growth that looks promising today will have to carry an increasingly heavy load. The bet is that product innovation and marketing investment can turn around a segment representing 71% of total revenue before the cost pressures eat too deeply into margins.
Open question
Lululemon is a profitable, cash-generating business facing a genuine test. Its home market is shrinking in comparable sales terms, tariffs are compressing margins with no clear end date, leadership is in transition, and rivals are actively taking customers. China is growing fast, but it represents only 16% of total revenue today. Can new product lines and a rebuilt leadership team reverse the Americas slide before the tariff drag and leadership uncertainty permanently reset what the brand can charge and who will pay it?
Compiled · 10-K · FY2026
Supply Chain, Tariffs and Trade Policy
The U.S. eliminated a tariff exemption on May 2, 2025, and will extend it globally by August 29, 2025. Since most of lululemon's products come from Vietnam, Cambodia, Sri Lanka, Indonesia, and Bangladesh, and most fabrics come from Taiwan, these tariff changes have already increased product costs in 2025 and are expected to continue into 2026 and beyond, reducing profit margins.
Supply Chain, Geographic Concentration
About 34 percent of lululemon's fabrics come from Taiwan. If military conflict, trade restrictions, or other disruptions affect Taiwan, lululemon would struggle to get the specialized fabrics it needs to make its products, which could stop the company from fulfilling orders.
Brand and Product Quality
lululemon's entire business depends on its brand reputation. If the company fails to deliver innovative, high-quality products, faces a product recall, or receives negative publicity about workplace practices or other issues, customers may lose confidence and switch to competitors, causing sales to drop significantly.
Supply Chain, Vendor Concentration
In 2025, the top five manufacturers made about 47 percent of lululemon's products, with the largest making 15 percent. If any major manufacturer closes, has financial problems, or stops working with lululemon, the company may not find replacement factories quickly enough to meet customer demand.
Management Transition
lululemon's CEO stepped down on January 31, 2026, and the company appointed temporary co-CEOs while searching for a permanent replacement. This leadership uncertainty could distract management, confuse employees and partners, and delay important business decisions.
10-K Item 1A · Risk Factors
