NEW YORK / RankWire.AI / – In its fiscal second-quarter 2026 results, Lululemon Athletica Inc. recorded earnings per share that exceeded Wall Street expectations but fell short on revenue. The company’s net revenue decreased by 4% compared to the previous year, reaching $2.42 billion, and did not meet analysts’ consensus estimate of $2.46 billion, amid weakening consumer demand across North American retail channels. Despite this revenue shortfall, diluted earnings per share amounted to $2.92, beating projections mainly due to a one-time tariff refund benefit.
The headline EPS figure was elevated by $134.5 million from International Emergency Economic Powers Act tariff refunds and an additional $4.1 million in related interest, contributing $0.86 per share to net income. When excluding these tariff reimbursements, underlying operating margins contracted as selling, general, and administrative expenses rose to 41.7% of net revenue. Revenue in the Americas declined 8% year-over-year, with a 12% drop in comparable sales, indicating persistent challenges in core products and decreasing store traffic.
In response to ongoing demand softness in key markets, management has substantially lowered its full-year fiscal 2026 guidance. Lululemon Athletica Inc. now forecasts total net revenue for the year between $10.35 billion and $10.50 billion, reflecting a 5% to 7% decline from the previous year. Projected full-year diluted earnings per share are in the range of $9.48 to $9.73, a significant decrease from the $13.26 reported in fiscal 2025. Following this announcement, the company’s shares dropped nearly 18% during extended after-hours trading.
Lululemon’s Earnings Surpass Expectations Due to One-Time Tariff Refunds
Partial offset from international markets helped mitigate domestic revenue declines, with total international net revenue rising 4% on a reported basis and 2% in constant currency. Meanwhile, mainland China comparable sales fell by 8%, reflecting a slowdown in regional retail traffic. Total operating income for the quarter decreased by 13% to $453.7 million, leading to operating margins decreasing from 20.7% in the prior-year period to 18.8%, despite gross margin expansion driven by tariff credits.
During the earnings call, as reported by market analysts, interim co-Chief Executive Officer and Chief Financial Officer Meghan Frank highlighted that brand momentum faced headwinds from softer consumer responses to new product launches and overall declines in store and digital channel traffic. In light of evolving demand, management has reduced its net new store opening target for the year to approximately 35 locations, while also adjusting inventory strategies to prioritize top-performing categories.
Forecasts Indicate a 10% to 11% Drop in Third Quarter Revenue Year-over-Year
At the end of the second quarter, the retailer held $1.4 billion in cash and cash equivalents, with total inventory at $1.7 billion—down 1% in dollar value and 7% in units compared to the previous year. The quarter’s capital allocation included $330 million spent on repurchasing 2.7 million common shares under existing authorization programs. The company intends to continue its share repurchase program while maintaining capital expenditure estimates between $680 million and $700 million for the full fiscal year.
For the third quarter of fiscal 2026, Lululemon expects net revenue to be in the range of $2.29 billion to $2.32 billion, representing a decline of 10% to 11% year-over-year. Diluted earnings per share for the quarter are projected between $0.93 and $0.98, compared to $2.59 in the same period last year. Analysts and investors will closely monitor key operational metrics as the company adjusts its product offerings ahead of the crucial holiday shopping season.