EPS of $5.01 beat estimates of $4.78; revenue of $3.64B beat estimates of $3.58B. The stock rose on the news. Lululemon's stronger 4Q results were offset by softer 1Q and full-year guidance, signaling that uncertainty about a US recovery persists as markdowns continue to weigh. China and rest of world sales remain bright spots, up double digits, alongside e-commerce. Management is working to lift new-product penetration to 35% this year, up from 23% in 2025. Its new launches such as Unrestricted Power and ShowZero sweat-concealing tech (with Frances Tiafoe) are helping, but more is needed to return US sales to growth. The company expects North America sales to fall 1-3% this year as higher markdowns weigh, but that could start to ease in 2H. Tariffs will remain a headwind, with guidance for a $380 million hit to gross profit in 2026, with $160 million of that offset by efficiency initiatives. There are still challenges here, but the low valuation we think continues to make it interesting.
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