Lululemon Athletica Inc. (LULU) shares were down Thursday morning as investors braced for the athletic apparel retailer's fiscal third-quarter earnings report. The results, due after the closing bell, come at a complicated moment for the company, which is wrestling with slower sales growth, weakening U.S. demand, and margin pressures that aren't going away anytime soon.

The Earnings Setup

Analysts are looking for revenue around $2.48 billion and earnings per share of $2.21 for the quarter. Market sentiment is decidedly mixed. Telsey Advisory Group maintained a $200 price target, but Guggenheim just initiated coverage Wednesday with a Neutral rating, which is Wall Street speak for "let's wait and see."

The real focus will be on management's commentary about holiday season guidance and what exactly they plan to do about the underperformance in the U.S. market. Telsey notes that while Lululemon is working to refresh its core collection with new products, meaningful benefits from these efforts probably won't show up until 2026. That's a long time to wait when your stock is already trading at depressed levels.

The Tariff Problem

Here's where things get particularly thorny. Tariffs have become a serious problem for Lululemon, actively eating into profitability. The company is dealing with the removal of the de minimis exemption, a trade rule that previously let low-value imports come in with minimal duties. Losing that benefit hurts.

Telsey Advisory Group points to this policy shift as a major driver behind Lululemon's weakened earnings outlook. The company is trying to mitigate the damage through vendor negotiations and pricing adjustments, but those strategies are back-loaded toward the second half of the year. Even with these efforts, analysts warn that the cost offsets will likely fall short, meaning margin headwinds will persist into fiscal 2026. That's not the kind of clarity investors were hoping for.

Leadership Reshuffle

Adding to the uncertainty, Lululemon announced last month that Celeste Burgoyne, President of the Americas and Global Guest Innovation, is leaving to pursue an opportunity outside the industry. In response, the company promoted André Maestrini, formerly EVP of International, to the newly created role of President and Chief Commercial Officer. The change took effect immediately, giving Maestrini integrated oversight of global regions and commercial strategy.

Leadership transitions during challenging periods always raise questions about continuity and strategic direction, and investors will be listening carefully for signals about how this reshuffle affects execution.

What the Numbers Say

Market data shows an interesting split. The stock has a Growth score of 91.67, suggesting strong underlying fundamentals, but a Momentum rating of just 9.15, indicating near-term weakness. That divergence tells you everything about where Lululemon sits right now: good long-term story, rough short-term reality.

Lululemon shares were trading down 1.42% at $184.95 Thursday morning. The stock is currently about 6.5% above its 50-day moving average of $173.61, which suggests some recent stabilization. But it's still trading roughly 20.5% below its 200-day moving average of $232.78, confirming that the longer-term trend remains bearish.

Investors will get more clarity Thursday afternoon when earnings drop. Until then, the question is whether management can offer a convincing path forward or whether the tariff and demand headwinds will continue to dominate the narrative into 2026.