Lululemon Cuts Outlook Again Days Before New CEO Takes Over

Quick Facts

Lululemon now expects fiscal 2026 revenue to decline 5% to 7%, down to roughly $10.35 billion to $10.5 billion, versus prior guidance of $11 billion to $11.15 billion.
Q2 revenue fell 4% to $2.42 billion, with Americas comparable sales dropping 12% and leggings sales down roughly 20% in the quarter.
Shares fell nearly 18% in after-hours trading to $99.95, pushing the stock’s year-to-date decline to approximately 69%.

Lululemon Athletica cut its full-year revenue and profit forecasts for the second time in three months on Sept. 3, one week before former Nike executive Heidi O’Neill takes over as CEO. The Vancouver-based company reported second-quarter revenue of $2.42 billion, missing analyst estimates of $2.46 billion, while net income dropped to $329.2 million, or $2.92 per share, from $370.9 million, or $3.10 per share, a year earlier.

The company now projects fiscal 2026 earnings per share of $9.48 to $9.73, down sharply from its prior forecast of $10.95 to $11.15. In June, Lululemon had guided for full-year revenue between $11 billion and $11.15 billion. The revised range sits at $10.35 billion to $10.5 billion.

For the third quarter, Lululemon projected revenue of $2.29 billion to $2.32 billion, implying a 10% to 11% decline from the prior year. Diluted EPS guidance for Q3 stands at $0.93 to $0.98, compared to $2.59 in the same period last year.

The Americas drove the steepest declines. Americas revenue fell 8%, with comparable sales down 12%. International comparable sales fell 3%, or 6% on a constant dollar basis. China, previously a growth engine with a 24% revenue increase a year ago, saw revenue fall 2% in constant dollars.

Interim Co-CEO and CFO Meghan Frank pointed to weak consumer sentiment and social media headwinds. “Negative commentary in the media and social channels impacted traffic,” Frank said, citing particular weakness in core women’s bottoms. Leggings, historically the brand’s strongest category, saw sales fall roughly 20% in the quarter as shoppers shifted toward wider-leg silhouettes.

Frank flagged some positive signs in newer product lines. “We are seeing some green shoots in product, particularly in our away-from-body assortment, including our Groove pant line, lululemon Align Foldover Relaxed Jogger, new Dance Studio,” she said.

Digital revenues fell 6%, contributing $0.9 billion, or 39% of total revenue. Men’s revenue declined approximately 1%, women’s dropped 4%, and accessories fell 13%. Gross margin expanded 200 basis points to 60.5%, but that figure includes $134.5 million in tariff refunds that added 560 basis points to the margin. The company has paid approximately $230 million in IEEPA tariffs to date.

Lululemon also pulled back on store expansion. The company now plans to open 35 net new stores this year, down from 40. It reduced pop-up locations from 65 at the end of last year to about 40 by year-end. The chain currently operates 825 stores.

Adding to the leadership transition pressure, Chief Strategy Officer Rachel Acheson, a 14-year company veteran, departed before O’Neill’s Sept. 8 start date. Interim Co-CEO and Chief Commercial Officer Andre Maestrini cited the Great Wall festival incident as a factor weighing on Chinese traffic and brand sentiment.

Analyst Matt Jacob of M Science offered a direct assessment of what O’Neill inherits. “Lululemon lost share in an increasingly competitive athleisure market and specifically has not been able to successfully address its weakening share of the core women’s pants despite multiple attempts,” Jacob said. “So that will be a challenge for the new permanent CEO.”

Shares closed after-hours at $99.95, below the company’s prior 52-week low of $104.44, and the stock has now lost nearly 69% of its value in 2025.