How LULU (Lululemon Athletica) Makes Money in 2025: A Deep-Dive With Income Statement

Welcome to the Value Sense Blog, your resource for insights on the stock market! At Value Sense, we focus on intrinsic value tools and offer stock ideas with undervalued companies. Dive into our research products and learn more about our unique approach at valuesense.io

Explore diverse stock ideas covering technology, healthcare, and commodities sectors. Our insights are crafted to help investors spot opportunities in undervalued growth stocks, enhancing potential returns. Visit us to see evaluations and in-depth market research.

Understanding how a leading athletic apparel retailer like Lululemon makes money is essential for investors and anyone interested in the business of global sportswear. In this post, we break down Lululemon's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Lululemon Overview

Lululemon operates a global network of retail stores and a robust e-commerce platform, specializing in premium athletic apparel and accessories for women and men. Revenue comes primarily from the sale of women's and men's activewear, as well as other product categories including accessories and footwear. The business is segmented by product line, with a strong focus on direct-to-consumer sales and international expansion.

Revenue Breakdown

• Total Revenue (Q3 2025): $2.53B (+6.5% YoY)
  • Women's Product Revenue: $1.55B (61.3% of total)
  • Men's Product Revenue: $625M (24.7% of total)
  • Other Product Categories Revenue: $353M (14.0% of total)
  • Growth is powered by international store openings, e-commerce expansion, and strong demand for new product lines.

Gross Profit and Margins

• Gross Profit: $1.48B (58.5% gross margin)
  • Cost of Revenue: $1.05B (+9.3% YoY)
  • Lululemon maintains robust margins due to its premium pricing, brand strength, and efficient supply chain management.
• Most costs come from product sourcing, manufacturing, and logistics.

Operating Income and Expenses

• Operating Income: $524M (-3.0% YoY, 20.7% margin)
• Operating Expenses: $952M (+9.1% YoY)
  • R&D: Not separately disclosed; innovation is embedded in product development and design.
  • SG&A: $952M (+9.1% YoY, 37.7% of revenue) — Includes store operations, marketing, digital investments, and corporate overhead.
  • Lululemon continues to invest in global expansion and digital capabilities while maintaining operational efficiency.

Net Income

• Pre-Tax Income: $534M (-4.4% YoY, 21.1% margin)
• Income Tax: $163M (30.5% effective tax rate)
• Net Income: $371M (-5.6% YoY, 14.7% net margin)
• Lululemon converts a significant portion of sales into profit due to its scalable business model and strong brand-driven pricing power.

What Drives Lululemon's Money Machine?

• Women's Product Revenue: 61.3% of revenue, driven by core leggings, tops, and seasonal collections.
• Direct-to-Consumer Sales: E-commerce and digital channels continue to grow, supporting higher margins and global reach.
• Strategic Investments: Expansion into men's apparel and international markets, with ongoing investment in digital infrastructure and supply chain.
• Future Growth Areas: Accessories, footwear, and international markets are key focus areas, though not yet as profitable as core segments.

Visualizing Lululemon's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant investments in marketing and global expansion, 14.7% of revenue drops to the bottom line.

Key Takeaways

• Lululemon's money comes overwhelmingly from women's athletic apparel, with men's and other categories providing additional growth.
• High gross and net margins illustrate the power of Lululemon's premium brand and direct-to-consumer business model.
• Heavy investment in SG&A, balanced by efficiency in supply chain and product development.
• Ongoing growth is driven by international expansion, digital sales, and new product categories.

Explore More Investment Opportunities

For investors seeking undervalued companies with high fundamental quality, our analytics team provides curated stock lists:

📌 50 Undervalued Stocks (Best) overall value plays for 2025
📌 50 Undervalued Dividend Stocks (For income-focused investors)
📌 50 Undervalued Growth Stocks (High-growth potential with strong fundamentals)

🔍 Check out these stocks on the Value Sense platform for free!

FAQ About Lululemon's Income Statement

1. What is the main source of Lululemon's revenue in 2025?

Lululemon generates over 61% of its revenue from women's athletic apparel, including leggings, tops, and outerwear. Men's apparel and other product categories such as accessories and footwear also contribute meaningfully.

2. How profitable is Lululemon in Q3 2025?

Lululemon reported net income of $371M in Q3 2025, with a net margin of approximately 14.7%, reflecting strong profitability driven by premium pricing and efficient operations.

3. What are the largest expense categories for Lululemon?

The biggest expenses on Lululemon's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs. SG&A reached $952M in Q3 2025, as Lululemon prioritizes store operations, marketing, and digital investments.

4. Why does the "Other Product Categories" segment operate at a loss?

Other Product Categories, despite generating $353M in revenue, may post lower or negative operating income due to aggressive investment in new product launches and international expansion, as Lululemon believes these will drive long-term growth—even if the division is unprofitable today.

5. How does Lululemon's effective tax rate compare to previous years?

Lululemon's effective tax rate in Q3 2025 was 30.5%, consistent with previous years. This moderate rate is primarily due to the company's international structure and the mix of domestic and foreign earnings.