Lululemon Earnings Outlook Craters, Stock Plunges 15% on Deepening Sales Slide

Lululemon’s (LULU) earnings outlook took another sharp step down on Thursday, with the company reporting a steeper-than-guided revenue decline and slashing full-year guidance for the second consecutive quarter, sending shares down 15%.

The numbers are worse than the headline suggests. Net revenue fell 4% in the second fiscal quarter of 2026, but on a constant dollar basis the decline was 5%, per the Yahoo Finance republication of lululemon’s Q2 2026 press release. Comparable sales dropped 9% reported, or 10% in constant dollars.

The Geographic Breakdown Behind the Lululemon Earnings Outlook Miss

The regional split tells the real story. Americas net revenue declined 8% and Americas comparable sales fell 12%, according to the lululemon Q2 2026 press release. International was less bad, with net revenue up 4% and comparable sales down only 3% on a reported basis, though that softens to a 6% constant-dollar decline once currency tailwinds are stripped out.

China Mainland, the growth market lululemon once leaned on to offset North American softness, posted comparable sales down 2% reported and down 8% on a constant dollar basis. A 6-percentage-point foreign-exchange tailwind was doing a lot of heavy lifting there.

Interim CEO Meghan Frank told analysts that “negative commentary” on social media weighed on second-quarter performance and that the company saw a “greater-than-expected” slowdown in core categories including leggings. Her fuller assessment: “While we are seeing good guest reaction to our activations and some of our newer styles, the overall response to our product launches remains inconsistent, and we’ve continued to see pressure on the brand in both of our largest markets.”

Guidance Cut Shows How Far the Story Has Shifted

The pace of guidance compression is the most damaging element here. When lululemon reported Q4 and full-year fiscal 2025 results in March 2026, it guided for full-year 2026 net revenue of $11.35 billion to $11.5 billion, according to the lululemon Q4 and full-year fiscal 2025 press release. That was revised down to $11.0 billion to $11.15 billion at the Q1 2026 results in June, per the lululemon Q1 2026 press release. Now the company guides for $10.35 billion to $10.5 billion, a 5% to 7% decline for the full year.

In under six months, the revenue outlook has moved from modest growth to a meaningful contraction. For context, fiscal 2025 revenue came in at $11.1 billion, up 5%, with diluted EPS of $13.26, per the lululemon Year in Review. The new full-year EPS guidance of $9.48 to $9.73 represents a roughly $3.50 per-share drop from last year’s actual result, and it includes a tariff refund benefit that is unlikely to recur.

That tariff refund is worth examining separately. The $134.5 million refund lifted gross margin by 560 basis points in Q2 2026. Strip it out and the gross margin picture is considerably weaker. Operating income still fell 13% to $453.7 million, and operating margin contracted 190 basis points to 18.8%, per the Q2 2026 press release. The underlying business is losing ground faster than the reported figures imply.

Q3 guidance adds little comfort. Lululemon expects third-quarter revenue of $2.29 billion to $2.32 billion, a decline of roughly 10% to 11% from the prior year, with EPS of 93 cents to 98 cents. At the Q1 results in June, the company had guided for Q2 revenue of $2.45 billion to $2.475 billion, which it missed by a wide margin.

The bull case rests on a leadership transition. Incoming CEO Heidi O’Neill, appointed in April 2026 and described by lululemon as a “proven brand builder,” takes over next week. Frank’s team says the focus is on new styles and tighter inventory to drive a sales inflection. Lululemon also reached a cooperation agreement with founder Chip Wilson in May 2026, adding two new board members, Laura Gentile and Marc Maurer, per the lululemon press releases index. A more stable boardroom removes one overhang.

The bear read is harder to dismiss. Three successive guidance cuts, double-digit Americas comparable sales declines, and deteriorating brand sentiment in both the US and China are not symptoms of a bad quarter. They suggest a brand relevance problem that a new CEO and a tighter inventory plan will take several quarters to address, assuming the strategy works at all. The tariff refund flatters the current-year earnings base; whatever multiple the market eventually applies to LULU will be on a normalized earnings figure that is materially lower than $9.48 to $9.73.

O’Neill’s first full quarter in charge is the earliest point at which the thesis can be tested. Until the Americas comparable sales trend reverses, the guidance cuts have not stopped.