Lululemon experienced a sharp decline in its stock price in premarket trading following the release of its second fiscal quarter earnings results. The company reported a 4% drop in revenue and a 9% decrease in comparable sales for the period, marking another challenging quarter for the apparel retailer. This setback came after the company had previously reduced its guidance in the preceding quarter.
Interim Chief Executive Meghan Frank attributed some of the company’s performance challenges to negative social media commentary that emerged during the quarter. Additionally, Lululemon faced steeper-than-expected declines in several core product categories, particularly leggings. Frank noted that while the company observed positive customer reception to certain new activations and product styles, the broader response to new launches remained uneven. She highlighted continued pressure on the brand in its two most significant markets.
The company significantly reduced its outlook for both the current quarter and the full year. For the third fiscal quarter, Lululemon projected revenue between $2.29 billion and $2.32 billion, representing a decline of approximately 10% to 11% year-over-year. For the full fiscal year, the company lowered its revenue guidance to a range of $10.35 billion to $10.5 billion, indicating a 5% to 7% decline and down substantially from prior guidance of $11 billion to $11.15 billion. Earnings per share guidance was also cut accordingly.
The company reported net income of $329.2 million for the quarter, compared to $370.9 million in the prior year. Gross profit declined 1% to $1.5 billion, though gross margin expanded 5.6%, aided by a tariff refund of $134.5 million. Management stated its strategy moving forward centers on introducing new product styles and managing inventory levels more tightly to restore sales growth. New Chief Executive Heidi O’Neill is scheduled to assume leadership the following week.
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