Lululemon Slashes Full-Year Outlook a Second Straight Quarter as Sales Tumble and Stock Plunges 15%

Lululemon Athletica reported second-quarter results after the close on September 3 that sent shares plunging as much as 20% in after-hours trading, settling around 15% lower, as a steep guidance cut overwhelmed a modest earnings beat. Revenue for the fiscal second quarter fell 4% year over year to $2.4 billion, missing the $2.46 billion consensus, while comparable sales dropped 9%, far worse than the roughly 4% gain analysts had expected. Americas comparable sales fell 12% and international comparables declined 3%.

Reported EPS of $2.92 appeared to top the consensus of around $2.94, but the headline figure was heavily inflated by a $134.5 million tariff refund that added $0.86 per share and boosted gross margin by 560 basis points. Stripping out that one-time item, underlying profitability was notably weaker. Gross margin came in at 60.5%, up 200 basis points year over year on the tariff benefit, while operating income fell 13% to $453.7 million and operating margin contracted 190 basis points to 18.8%.

The company cut its full-year fiscal 2026 revenue outlook to $10.35 billion to $10.5 billion, down sharply from its prior guidance of $11.0 billion to $11.15 billion, implying a revenue decline of roughly 5% to 7% for the year. Full-year EPS guidance was reduced to $9.48 to $9.73 from $10.95 to $11.15. Third-quarter guidance was equally jarring: management guided Q3 revenue to $2.29 billion to $2.32 billion against a $2.53 billion consensus, and Q3 EPS to $0.93 to $0.98 versus the $2.40 to $2.41 the Street had penciled in.

Executives on the conference call said the company saw a greater-than-expected slowdown in core categories including leggings, as well as overall softness in bags, and that it had anticipated a better consumer response entering the second half. Management flagged that slower top-line trends will require additional seasonal clearance activity and that marketing investment will increase in the back half of the year. North America is expected to decline in the mid-teens percentage range in Q3, with the U.S. also in that range and Canada lower, while China mainland and the rest of the world are expected to grow 3% to 5%. The Middle East franchise business continues to be affected by the regional conflict, and tourism softness is weighing on European results.

The guidance cut arrives just days before Nike veteran Heidi O'Neill officially takes over as CEO, a transition that analysts say amplifies the stakes. Retail analyst Stacey Widlitz said on Bloomberg that Lululemon needs a full product overhaul, while BTIG's Janine Stichter said the real surprise in the quarter was weakness in China. One analyst noted the company carries no debt and holds $1.4 billion in cash, but that the central challenge is reigniting sales growth. Lululemon shares have now fallen more than 40% in 2026 heading into the print, and the after-hours selloff deepened that decline significantly.