Key Takeaways:
Lululemon Athletica (NASDAQ: LULU) cut its full-year revenue and earnings outlook alongside its Q2 FY2026 report, sending the stock down roughly 20% to $100.07, its lowest level in about eight years.
The Vancouver-based athleisure retailer now expects fiscal 2026 net revenue of $10.35 billion to $10.50 billion, a decline of 5% to 7%, against prior guidance of $11.0 billion to $11.15 billion. Diluted earnings per share guidance fell to $9.48 to $9.73 from $10.95 to $11.15.
"As we moved into Q2, we faced negative commentary in the media and social channels, which impacted traffic and softer than planned response to some new product launches, which contributed to a moderating sales trend," interim co-CEO and Chief Financial Officer Meghan Frank said on the earnings call.
For the quarter ended Aug. 2, revenue fell 4% to $2.42 billion from $2.53 billion a year earlier, missing the $2.46 billion consensus. Comparable sales dropped 9% globally, with Americas comps down 12% and international comps down 3%. Leggings sales declined approximately 20%, according to 24/7 Wall St.
GAAP EPS of $2.92 topped consensus, but included an $0.86 per share benefit from a $134.5 million IEEPA tariff refund. Gross margin improved 200 basis points to 60.5%, lifted 560 basis points by the refund. Net income fell to $329.22 million from $370.9 million, and operating margin narrowed 190 basis points to 18.8%.
The company repurchased 2.7 million shares for $330 million and opened nine net new company-operated stores, taking its total to 825 worldwide.
Third-quarter net revenue is guided to $2.29 billion to $2.32 billion, a 10% to 11% decline, with diluted EPS of $0.93 to $0.98. Q3 operating margin is guided to 6.5%, down from 17% a year earlier.
The stock sits down 51.85% year to date. Reddit sentiment flipped from bullish (72) to bearish (22), per 24/7 Wall St. Incoming CEO Heidi O'Neill starts next week and will conduct a strategic review, according to Barron's.
The guidance cut is the second this year and carries read-through for premium apparel peers including Nike (NYSE: NKE) and Abercrombie & Fitch (NYSE: ANF), both of which have leaned on North America for growth. A durable bottom requires evidence that Americas traffic is stabilizing; until then, upside moves may face resistance. Investors will watch O'Neill's turnaround plan and holiday traffic data for the first sign of a floor.
This article is for informational purposes only and does not constitute investment advice.
