Morning Note: Market news and an update from Lululemon.

Market News

Donald Trump said the US would be willing to provide help Ukraine as part of a security agreement to end the war, but voiced frustrations with the pace of talks.

The Fed’s move to buy $40bn in T-bills each month has Wall Street racing to rewrite its 2026 supply forecasts. Barclays sees roughly $525bn in Fed bill purchases next year, up from $345bn, while JPMorgan and TD Securities also anticipate higher demand. 10-year Treasury yields held at 4.16%. Gold rose to $4,285 an ounce, holding near a seven-week high and heading for a weekly gain, supported by expectations of further US monetary easing.

US equities recovered from a loss last night to end the session little changed – S&P 500 (+0.2%, to a new high); Nasdaq (-0.3%). The Dow and the Russell 2000 also hit a new high. Google owner Alphabet was soft following OpenAI’s launch of GPT-5.2, its most advanced AI model. The company said the model is better at creating spreadsheets, building presentations, perceiving images, writing code. and understanding long context.

In Asia this morning, equities headed for their highest close in a month: Nikkei 225 (+1.4%); Hang Seng (+1.5%); Shanghai Composite (+0.4%). All 50 economists surveyed by Bloomberg expect the Bank of Japan to raise rates by 0.75% next week.

The FTSE 100 is currently 0.7% higher at 9,760. The UK economy unexpectedly shrank by 0.1% in October, versus expectations for a 0.1% rise. This could make a rate cut next week by the Bank of England increasingly likely. Sterling slipped to $1.3380 and €1.1395.

Source: Bloomberg

Company News

Last night, Lululemon Athletica released results for the third quarter of its financial year to January 2026. Performance exceeded management expectations and the company nudged up its full-year guidance. The company also increased its share buyback authorisation and announced its CEO succession plans. The shares rose by 10% in after-hours trading and provided a positive read-across from Nike and Adidas.

Lululemon is principally a designer, distributor, and retailer of healthy lifestyle-inspired athletic apparel and accessories. Apparel items include pants, shorts, tops, and jackets designed for a healthy lifestyle including athletic activities such as yoga, running, and training. The company also offers a range of products designed for being on the move, fitness-related accessories, and footwear.

The group operates almost 800 stores across 18 countries. Revenue is split between stores, online, and other revenue, which includes net revenue from outlets, temporary locations, sales to wholesale accounts, and license and supply arrangements. The company is also evolving its studio strategy and will focus on digital app-based services, providing in-home hardware and content for members.

The group is executing on its Power of Three ×2 growth plan, driven by product innovation, customer experience, and market expansion. The aim is to double annual sales between 2021 and 2026 from $6.25bn to $12.5bn, including a target to double men’s, double direct to consumer, and quadruple international net revenue. In FY2024, revenue was $10.6bn.

During the three months to 2 November 2025, revenue grew 7% on a constant dollar basis to $2.60bn, versus the market forecast of $2.48. By category, Women’s Apparel rose by 6%, Men’s Apparel was up 8%, and Accessories rose 12%. Sales declined by 2% in the Americas, driven by a 3% fall in the US. Elsewhere, the International business rose by 33%, driven by China (+47%). Comparable sales increased by 2% on a constant dollar basis. Store revenue was flat, while digital increased by 13%.

The gross margin slipped by 290 basis points to 55.6%, primarily due to higher tariffs, partially offset by higher pricing and lower product costs. The operating margin fell by 350 basis points to 17.0%. EPS declined by 10% to $2.59, albeit better than the consensus expectation of $2.48.

The company added 12 net new company-operated stores during the quarter. Inventories increased by 11% to $2.0bn and were up 4% on a unit basis. The group ended the quarter with $1.0bn in cash and cash equivalents. During the quarter, the group repurchased $189m of its shares. Including the recently announced $1.0bn increase in buyback authorisation, the current programme has $1.6bn remaining.

Looking forward, Lululemon pushed up its guidance for the financial year to January 2026. Net revenue is now expected to be $10.96bn to $11.05bn, (versus $10.85bn-$11.0bn previously). Adjusted EPS is now expected to be between $12.92 and $13.02, versus the previous guidance of $12.77-$12.97. This guidance includes an estimated reduction in income from operations of $210m, net of currently anticipated mitigation efforts, including vendor savings, and pricing actions, reflecting our current assumptions about higher levels of tariffs on imports into the US.

The company also announced that Calvin McDonald plans to step down as CEO, effective January 31, 2026. The company is working to facilitate a smooth transition and is conducting a comprehensive search process to identify the company’s next CEO.

Source: Bloomberg