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.
- Incoming CEO Heidi O'Neill is expected to focus on reigniting sales.
Lululemon Athletica Inc. reported first-quarter fiscal 2026 revenue of $2.5 billion, a 4% increase from the prior year, though only a 2% rise on a constant dollar basis. The Americas region saw a 3% net revenue decline and a 4% constant dollar revenue drop, with comparable sales down 5% (6% constant dollar). This weakness was partially offset by international sales, which increased 22% net and 16% in constant dollars, with comparable sales up 13%. Profitability declined, with gross profit falling 3% to $1.3 billion and gross margin decreasing 410 basis points to 54.2% due to cost pressures and sales mix. Income from operations dropped 37% to $276.9 million, with operating margin falling 730 basis points to 11.2%. Diluted earnings per share decreased to $1.69 from $2.60 a year earlier. The company repurchased 2.2 million shares for $358.3 million. For the second quarter, Lululemon expects revenue between $2.450 billion and $2.475 billion (a 3% to 2% decline) and diluted earnings per share between $1.76 and $1.81. The fiscal 2026 revenue outlook was revised to a decline of 1% to flat growth, between $11.000 billion and $11.150 billion, with full-year earnings per share projected between $10.95 and $11.15. Incoming CEO Heidi O'Neill is expected to focus on reigniting sales.