Lululemon shares fall after earnings miss and renewed forecast cut amid China and U.S. weakness

Shares of Lululemon Athletica (Nasdaq: LULU) are down more than 20% in premarket trading on Friday.  The plunge follows a disappointing second quarter earnings report, released by the Canadian apparel company on Thursday.  Lululemon’s revenue fell 4% year-over-year (YOY) to $2.4 billion. It failed to meet the company’s predicted 2% to 3% decline, “with the shortfall driven predominantly by China Mainland,” Lululemon interim CEO Meghan Frank said in a post-earnings call.  China saw a 4% growth YOY—though a 2% decline when looking at constant dollars—but failed to meet the retailer’s expectations. Meanwhile, revenue fell 8% YOY in the U.S., though the figure was still better than the company’s prediction.  Downbeat As for China, all it takes is looking at quarter one’s growth to see how bad 4% is. Last quarter, Lululemon had a 30% jump YOY in China’s revenue, holding at 23% in constant dollars. Then, less than a month after quarter two began, Lululemon made a very public fumble. On May 30, the company hosted a yoga festival on the Great Wall of China. The event’s 2,000 guests were welcomed to what was supposed to be a celebration of Chinese culture. That celebration featured a drum circle with Chinese actor Zhu Yilong.  The only problem? The drums were actually Japanese taiko.  The actor posted a photo of himself on Weibo—a popular Chinese social media platform. The drum and Lululemon’s logo were both visible. It didn’t take long until social media users noticed the mistake, with discussions reaching 50 million viewers.  Lululemon scrubbed media from the festival and apologized: “We attach great importance to the feedback from the society,” the company posted to its Weibo account. “Due to lack of professional knowledge, we failed to fully identify potential disputes early and have fully recognized that we ought to have planned and reviewed the percussion performance with more caution and thoroughness.” But, as Frank indicated on Thursday’s earnings call, the damage was done.  “As we moved into quarter two, 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,” Frank said on the call.  Beginning a new chapter Lululemon now expects $10.35 billion to $10.50 billion in revenue for 2026, a drop of 5% to 7% YOY. This is a significant change from last quarter’s prediction of $11.00 billion to $11.15 billion and a decline of only 1% to 0%.  Notably, Lululemon starts a new chapter next week. On September 8, Heidi O’Neill will take over as CEO. O’Neill spent 26 years at Nike, supporting its growth from a $9 billion business to a $45 billion one. She was laid off from Nike last year when CEO Elliott Hill eliminated her role.  Even before Thursday’s earnings report, Lululemon’s stock price was down more than 42% this year. When markets open on Friday, it is on track to hit a 52-week low of under $97 a share, less than half of what it was in January.

Lululemon Crashes After Another Brutal Guidance Cut; Jefferies Flags "Triple Whammy" Quarter Lululemon Athletica shares crashed in premarket trading in New York after the athletic-apparel retailer slashed its full-year outlook again, suggesting that demand in the Americas is deteriorating as Alo and other rivals gain market share. The move also puts mounting pressure on its incoming chief executive to revive the struggling brand. Lululemon expects full-year revenue of between $10.35 billion and $10.50 billion, down sharply from its previous forecast of $11 billion to $11.15 billion and well below the Bloomberg Consensus estimate of $11.03 billion. Full-year earnings are forecast at $9.48 to $9.73 per share, compared with the previous range of $10.95 to $11.15 and below the Bloomberg Consensus estimate of $10.84. "We know there is significant work ahead for us," Lululemon's interim co-CEO, Meghan Frank, said during the company's call with analysts. "We're applying what we're learning this year to how we operate globally going forward." The third-quarter forecast was even grimmer. Lululemon expects revenue of $2.29 billion to $2.32 billion, well below the $2.53 billion estimate. Earnings are projected at just 93 cents to 98 cents per share, versus the $2.41 analysts had expected. The dismal forecasts overshadowed stronger-than-expected second-quarter profitability. Adjusted earnings of $2.92 per share exceeded the $1.80 estimate, while gross margin and operating margin also surpassed Bloomberg Consensus estimates. Revenue of $2.42 billion, however, missed expectations. Shares crashed in premarket trading, falling about 19.3%. As of Thursday, shares were down 41.4% year to date. Lorraine Hutchinson, a managing director and senior retail analyst at BofA Securities, wrote in a note on Friday morning that the athletic-apparel retailer's guidance downgrade failed to convince her team that the stock had found a bottom, given that North American sales continue to weaken and an unexpected reversal in China is pushing any potential recovery further into the future. Here's what Hutchinson told clients: Guidance reset again; no line of sight to inflection LULU's 2Q miss in China and lack of progress in North America push the recovery timeline further out. Management laid out a detailed product and marketing plan to try to stabilize the business, but is not embedding any resultant improvement into the outlook. However, incoming CEO Heidi O'Neill joins next week, so we may hear a change in strategy on next quarter's earnings call. We think the depressed multiple balances the reset with the challenges ahead and retain our Neutral rating. LULU reduced its guidance by 15% to $9.48-9.73 (incl 86c of tariff refunds). We are cutting our F26/F27E EPS by 13%/31% and our PO to $122 from $140, still based on 12x P/E, now on F28 as we roll our valuation year forward. China: from growth engine to the source of the miss China Mainland grew 4% (-2% ccy) and comps declined 8%, well below mid-to-high-teens sales guidance. The shortfall was due to weak traffic driven by pressure following social media commentary after the Great Wall marketing event. E-com was further hurt by a softer 618 event on Tmall. China sales were pressured in May, improved in June, then pressure resumed in July. To rebuild brand heat, management is focusing on brand-led marketing and activations in Tier-1 cities to try to shift the narrative. We model continued comp declines for the remainder of the year and into 1H27. US comps: leggings decline/away-from-body green shoots North America revenue fell 8% with comps down 12%. Leggings sales declined 20% in Q2 and women's bottoms were down MSD. Customers are shifting to away-from-body silhouettes and LULU is chasing 20% more volume than last year. Accessories also fell 13%, with strength in backpacks offset by softness in bags. Margins get worse before they get better Guidance implies that US trends worsen in 3Q, as 2Q sales benefited from more markdowns and categories like leggings continue to underperform. With a new CEO starting next week, it's difficult to have visibility on strategy, but we were surprised to hear that store openings and marketing will continue as planned. This is causing 1050bp of margin decline in 3Q. 4Q margin guidance calls for only ~240bp of pressure as LULU laps the bulk of its tariff pressure and continues to work on controlling SG&A. LULU also has $105mn ($0.65) of tariff refunds outstanding that it has not included in guidance. Here's what other desks on Wall Street are saying, courtesy of Bloomberg: Guggenheim (Neutral) Analyst Simeon Siegel says he fears that the reduced top-line guidance does not incorporate a deep enough cut looking further out. The trim in the forecast "is another along a stretch of a 'thousand cuts,' rather than a 'kitchen sink' approach." Jefferies (Hold, PT cut to $105 from $115) Analyst Randal Konik says Lululemon's 2Q was "a triple whammy": US revenue was down, the women's business was down, with leggings falling 20%, and China was also lower. "Guidance cuts for both 3Q and the year confirm the fixed cost base is too big for a shrinking top line." CFRA (Buy, PT $169) Analyst Zachary Warring says the Americas comparable-sales decline of 12% marks a meaningful acceleration from the 5% decline reported in the year-ago period, indicating "deepening market share losses in the company's largest and most profitable region." "Heidi O'Neill joins as CEO on September 8, 2026, and the company's ability to stabilize the Americas business and restore full-price selling discipline will be the central focus for investors in the quarters ahead." Bloomberg Intelligence "Lululemon's challenges are far from over after weaker 2Q results prompted another cut to its 2026 outlook, with pressure set to intensify in 2H," writes Poonam Goyal. Goyal says the new CEO will need to restore product innovation and brand momentum, which should take several months to show tangible progress. Jay Sole, managing director and senior retail analyst at UBS, told clients earlier today that he continues to see "a balanced upside/downside skew, even at a lower price." Tyler Durden Fri, 09/04/2026 - 07:20