Key facts
- Lululemon cut its annual profit forecast and projected second-quarter earnings below Wall Street estimates.
- The company stated that its products failed to win back shoppers in its key U.S. market.
- Shares dropped 11% in extended trading.
- First-quarter revenue in the U.S. fell 4% in constant dollars.
- Quarterly revenue in China rose 23% in constant dollars.
Lululemon Athletica Inc. has cut its annual profit forecast and projected second-quarter earnings well below Wall Street estimates, as the athletic apparel maker's products have struggled to regain shoppers' interest in its key U.S. market. Shares of the company fell 11% in extended trading following the announcement. Lululemon anticipates its second-quarter gross margin will decrease by approximately 410 basis points, attributed to factors including higher tariff costs and investments. The company's first-quarter revenue in the U.S., its largest market, declined 4% in constant dollars, contrasting with a 2% increase a year prior. However, revenue in China saw a 23% increase in constant dollars during the same quarter. Analysts note that Lululemon faces challenges including a leadership transition, waning brand appeal in North America due to design missteps, and increasing competition. Lululemon forecasts second-quarter profit per share between $1.76 and $1.81, significantly lower than analysts' average estimate of $2.68. The retailer also revised its fiscal 2026 revenue outlook to flat to a 1% decline, down from a prior forecast of a 2% to 4% increase, and lowered its full-year earnings per share projection to between $10.95 and $11.15, from $12.10 to $12.30 previously.