Lululemon experienced a significant downturn as its shares dropped 20% in premarket trading following disappointing second fiscal quarter earnings and a reduced outlook for the year [1]. The retailer reported a 4% decline in revenue and a 9% decrease in comparable sales for the quarter, marking another period of underperformance after previously lowering its guidance [1]. Interim CEO Meghan Frank attributed the weak results to 'negative commentary' on social media and a 'greater-than-expected' slowdown in core categories such as leggings [1].
For the third fiscal quarter, Lululemon expects revenue between $2.29 billion and $2.32 billion, representing a decline of roughly 10% to 11% from the prior year, and anticipates earnings of 93 cents to 98 cents per share [1]. The full-year outlook was also cut, with net revenue now projected between $10.35 billion and $10.5 billion, a 5% to 7% decrease, down from previous guidance of $11 billion to $11.15 billion. Full-year earnings are expected to be between $9.48 and $9.73 per share, compared to prior guidance of $10.95 to $11.15 per share, with the new outlook including a boost from tariff refunds [1].
In the second fiscal quarter, Lululemon reported net income of $329.2 million, or $2.92 per share, compared to $370.9 million, or $3.10 per share, the year prior. Gross profit decreased 1% to $1.5 billion, while gross margin grew 5.6%, aided by a tariff refund of $134.5 million [1]. The company’s earnings per share came in at $2.06 adjusted, beating analyst expectations of $1.79, but revenue of $2.42 billion fell short of the expected $2.46 billion [1].
Frank stated that management is focusing on introducing new styles and tightening inventory to return to sales growth, acknowledging that 'much more work' remains to be done. The company continues to face challenges in regaining strength and relevancy among customers, amid criticism from founder Chip Wilson [1].
CONCLUSION
Lululemon's sharp share price decline and reduced outlook signal ongoing struggles for the retailer, with sales and earnings falling short of expectations. Management is taking steps to address the downturn, but the market reaction underscores investor concerns about the company's ability to regain momentum. The lowered guidance and continued sales pressure suggest a challenging path ahead.