Lululemon experienced a significant stock decline following the release of disappointing financial results and a revised outlook for the remainder of the year. The company reported a 4% decrease in revenue and a 9% decline in comparable sales for the second fiscal quarter, marking another challenging period for the retailer after it had already adjusted guidance downward in the previous quarter.
Interim CEO Meghan Frank attributed some of the performance weakness 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 the company observed positive customer response to certain promotional activities and newer product offerings, the broader reception to product introductions remained uneven, with continued headwinds in the retailer’s two most significant markets.
The company substantially lowered its financial forecasts for both the upcoming quarter and the full year. For the third fiscal quarter, Lululemon projects revenue between $2.29 billion and $2.32 billion, representing a decline of approximately 10% to 11% compared to the prior-year period, with earnings per share expected between 93 cents and 98 cents. Full-year guidance was reduced to net revenue between $10.35 billion and $10.5 billion, down 5% to 7% from the prior year, compared to previous expectations of $11 billion to $11.15 billion. Earnings guidance for the full year was cut to $9.48 to $9.73 per share from previous guidance of $10.95 to $11.15 per share, though this revised outlook includes benefits from tariff refunds.
For the second quarter, the company reported net income of $329.2 million, or $2.92 per share, down 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 5.6%, aided by a $134.5 million tariff refund. Management indicated its strategy moving forward involves expanding style offerings and reducing inventory levels to return to sales expansion. Leadership transitions are also underway, with incoming CEO Heidi O’Neill set to assume her position the following week.
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