Elliott's $1B Bet on Lululemon: A Historical Lens on Activism and Value

The story overseas is a stark contrast. International revenue is accelerating, with international revenue jumping 33% year over year in the third quarter. The standout performer is China Mainland, where revenue surged 46% year over year. This explosive growth is fueled by a massive untapped runway. The company is just beginning to tap the East Asian market, and its recent flagship store opening in Milan signals a serious push into Europe. This creates a fundamental divergence: a mature, competitive core market versus a high-growth, capital-intensive expansion story.

This geographic split defines the risk and opportunity. The international engine is powerful, but it's also expensive to build. Opening flagship stores and scaling operations in new regions requires significant investment before revenue flows. The company's recent inventory increase of 11% year over year hints at this build-out pressure. Meanwhile, the North American slowdown is a headwind to the top line, and the recent 290 basis point drop in gross margin points to margin pressure from tariffs and markdowns.