LULU
lululemon athletica inc.
Consumer Cyclical · Apparel Retail · Canada · Stock
Score Breakdown
Scored for Long-Term Growth profile
Sub-scores are 0–20 each; Model Score is weighted by your selected investment goal. How it works →
Why Ranked Here
- The profitability factor is the strongest contributor, supported by a 19.9% operating margin and 18.7% return on assets, reflecting genuine business quality.
- The growth factor is penalized by the combination of only +4.9% revenue growth alongside -13.0% net income and -9.4% EPS declines, which the model treats as a meaningful deterioration in profit conversion.
- Zero scores in both the dividend and theme categories structurally reduce the composite, as lululemon neither pays a dividend nor aligns with any of the 24 tracked macro themes.
Why Not Higher
- The earnings contraction — net income down -13.0% and EPS down from $14.64 to $13.26 — directly suppresses the growth score, preventing the strong profitability metrics from lifting the overall rating.
- With no dividend history and no macro theme assignment, two full scoring dimensions contribute zero points, creating a ceiling on the composite score that cannot be overcome by operational metrics alone.
Data Confidence
6 / 10
Medium — some data gaps
Why This Score
Grounded in figures from this company's SEC EDGAR filings — not a restatement of the score itself.
Revenue grew modestly from FY2025 to FY2026, rising +4.9% to $11,102,600,000, but net income fell -13.0% and diluted EPS declined -9.4% over the same period, from $14.64 in FY2025 to $13.26 in FY2026.
The model penalized the combination of slowing top-line expansion and meaningful bottom-line contraction; a low single-digit revenue gain paired with double-digit earnings and EPS declines signals deteriorating profit conversion, which the model weighted heavily against a higher growth score.
In FY2026, lululemon posted an operating margin of 19.9%, a net margin of 14.2%, and a return on assets of 18.7%, reflecting strong earnings efficiency relative to both revenue and the asset base.
The model rewarded these high-quality margin and return metrics; a nearly 20% operating margin and an 18.7% return on assets are indicative of a capital-efficient business, supporting a near-top profitability score.
Filing evidence currently available does not support a more specific explanation for this factor.
Quarterly revenue rose sequentially from 2026Q1 ($2,370,660,000) through 2026Q3 ($2,565,920,000) before surging in 2026Q4 ($3,640,801,000); operating income followed a similar pattern, dipping in 2026Q3 ($435,886,000) relative to 2026Q2 ($523,814,000) before recovering sharply to $812,290,000 in 2026Q4. Net income showed a comparable mid-year dip in 2026Q3 ($306,835,000) before rebounding to $586,871,000 in 2026Q4.
The model appears to have recognized the strong Q4 finish but tempered the score due to the mid-year softness in operating and net income in 2026Q3, producing a moderate momentum rating rather than a top-tier one.
lululemon does not currently pay a dividend and has no mapped dividend history; this is a genuine characteristic of the company, not a data limitation.
The model assigns a score of zero for this factor because income-oriented scoring requires an active dividend; a company that retains all earnings rather than distributing them will receive no credit under this component regardless of overall financial performance.
lululemon is not currently assigned to any of the 24 tracked macro themes in the model.
The absence of a theme assignment is a neutral classification outcome; it means the security does not presently align with a tracked macro theme, and the zero sub-score reflects that no theme-based credit was applicable under the current methodology.
Research Summary
AI-generated analysis reflects data and conditions as of the report date shown above. Verify any specific figures through primary sources before acting on this analysis.
lululemon athletica generated $11.1 billion in revenue in FY2026, a modest +4.9% year-over-year gain, but net income fell -13.0% and diluted EPS declined from $14.64 to $13.26, signaling that profit conversion is deteriorating even as the top line grows. On the positive side, the business retains strong profitability characteristics, with a 19.9% operating margin, 14.2% net margin, and 18.7% return on assets, reflecting a capital-efficient operation. Quarterly momentum showed a mid-year dip in operating and net income during 2026Q3 before a sharp Q4 recovery, and the company pays no dividend and carries no macro theme assignment, both of which limit its composite score. Overall, the model rates lululemon as Monitor Only with a Medium risk rating, reflecting a business with genuine quality but meaningful near-term earnings pressure.
Plain English
lululemon is still a very profitable company with strong margins, but its earnings are shrinking even though sales are growing, which is a warning sign — and since it pays no dividend and doesn't fit any special investment theme right now, its overall score lands in the middle of the pack.
Bull Case vs. Bear Case
Bull Case
- lululemon's operating margin of 19.9% and return on assets of 18.7% in FY2026 demonstrate that the business remains highly capital-efficient and earns strong returns relative to its asset base.
- Revenue grew +4.9% to $11.1 billion in FY2026, and quarterly revenue accelerated through the year, surging to $3.64 billion in 2026Q4, suggesting underlying demand remains intact.
- Operating income rebounded sharply to $812.3 million in 2026Q4 after a mid-year dip, indicating the business has the ability to recover profitability within a single fiscal year.
Bear Case
- Net income fell -13.0% and diluted EPS dropped from $14.64 to $13.26 in FY2026, meaning the company is converting a growing revenue base into meaningfully less profit — a deteriorating trend the model weighted heavily.
- Operating and net income both dipped in 2026Q3 relative to 2026Q2, introducing mid-year volatility that tempered the momentum score and raises questions about consistency of earnings delivery.
- lululemon pays no dividend and is not assigned to any of the 24 tracked macro themes, eliminating two entire scoring categories and structurally capping the composite score regardless of operational performance.
What Could Change the Picture
Bullish Triggers
- A sustained recovery in net income and EPS growth — reversing the -13.0% net income decline seen in FY2026 — would signal that profit conversion is improving and could meaningfully lift the growth score.
- If quarterly operating income stabilizes above the 2026Q3 trough and continues the Q4 trajectory, momentum scoring could improve, reflecting more consistent earnings delivery.
Bearish Triggers
- If the gap between modest revenue growth (+4.9%) and double-digit earnings declines (-13.0% net income) widens further, it would confirm a structural margin compression trend rather than a temporary dip.
- Continued absence from tracked macro themes and no initiation of a dividend would keep two full scoring categories at zero, limiting any composite score recovery even if operations improve.
Risk Profile
Medium RiskMomentum showed a notable mid-year softness with operating income dipping to $435.9 million in 2026Q3 from $523.8 million in 2026Q2 and net income falling to $306.8 million in the same quarter, introducing intra-year earnings volatility. While the Q4 rebound was strong, this pattern of mid-year weakness contributes to the Medium risk rating by highlighting that earnings delivery is not yet consistently stable across all quarters.
This report is for educational and research purposes only. It does not constitute financial, investment, legal, or tax advice — always conduct your own due diligence before making investment decisions.