Lululemon experienced a sharp stock decline following the release of disappointing financial results and a substantially lowered outlook for the remainder of the fiscal year. The company reported a 4% revenue decline and a 9% decrease in comparable sales for the second fiscal quarter, marking another challenging period for the apparel retailer after it had already reduced guidance in the previous quarter.
Interim CEO Meghan Frank attributed some of the performance challenges to negative social media commentary that impacted results during the quarter. The company also faced steeper-than-anticipated weakness in key product categories, particularly leggings. Frank noted that while customer reception to certain activations and newer product lines showed promise, the broader response to product launches remained uneven, with continued pressure on the brand in its two most significant markets.
Looking forward, Lululemon provided notably reduced guidance across multiple metrics. For the third fiscal quarter, the company projects revenue between $2.29 billion and $2.32 billion, representing a decline of approximately 10% to 11% compared to the same period in the prior year, with expected earnings per share between 93 cents and 98 cents. Full-year projections were substantially cut, with net revenue now expected between $10.35 billion and $10.5 billion, down 5% to 7%, compared to the company’s previous guidance range of $11 billion to $11.15 billion. Annual earnings per share guidance was lowered to between $9.48 and $9.73 from the prior range of $10.95 to $11.15, though this figure includes assistance from tariff refunds.
In the second fiscal quarter, Lululemon reported net income of $329.2 million, or $2.92 per share, declining from $370.9 million, or $3.10 per share, in the comparable prior-year period. Gross profit decreased 1% to $1.5 billion, while gross margin expanded to 5.6%, supported by a $134.5 million tariff refund. Management indicated plans to focus on introducing new styles and managing inventory levels more tightly as it works to restore sales growth momentum. Leadership changes are also underway, with new CEO Heidi O’Neill set to assume her position the following week.
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