Lululemon slides on a tariff-inflated Q2 beat, a revenue miss and a second guidance cut

Lululemon reported fiscal Q2 2026 revenue of $2.42 billion, down 4% and short of the $2.46 billion estimate, with comparable sales down 9%. Reported EPS of $2.92 beat a $1.82 consensus, but the beat rests on a one-time $134.5 million tariff refund worth $0.86 per share; excluding it, EPS was $2.06. The company cut full-year revenue guidance to $10.35 billion to $10.50 billion and EPS guidance to $9.48 to $9.73, citing weak China demand and tougher U.S. competition. Shares fell 15% in the regular session and as much as 20% after hours, five days before incoming CEO Heidi O'Neill takes over.

LULU reported fiscal second-quarter 2026 revenue of $2.42 billion on September 3, down 4% year over year and short of the $2.46 billion analysts expected, with comparable sales down 9%, or 10% in constant currency . The headline earnings figure of $2.92 per share cleared a $1.82 consensus by a wide margin, but the gap is almost entirely a one-time item: a $134.5 million tariff refund contributed $0.86 per share and 560 basis points of gross margin. Strip it out and earnings were $2.06 per share .

The more consequential news was the outlook. Lululemon now guides full-year revenue to $10.35 billion to $10.50 billion, a decline of 5% to 7%, against prior guidance of flat to down 1%, and cut full-year EPS guidance to $9.48 to $9.73 from $10.95 to $11.15 . Third-quarter guidance is starker still: revenue of $2.29 billion to $2.32 billion against a $2.53 billion consensus, and EPS of $0.93 to $0.98 against $2.41. That is the second cut to the fiscal 2026 outlook this year.

Management pointed at two regions. Americas revenue fell 8% with comparable sales down 12%, while China Mainland comparable sales fell 2%, or 8% in constant currency, against growth of 24% a year earlier, which the company tied to negative commentary following a marketing campaign . Interim co-CEO Meghan Frank, who is also chief financial officer, described a greater-than-expected slowdown in core categories such as leggings . Analysts covering the print added a third factor: competitive pressure from newer brands including Alo Yoga and Vuori . Gross margin did expand 200 basis points to 60.5%, though the tariff refund accounts for more than all of that, and operating margin contracted 190 basis points to 18.8%.

The stock closed the regular session at $121.77, up 1.4%, before the print landed after the bell; it then fell 15% on the day per CNBC's tally and as much as 20% in extended trading . Volume ran at 16.28 million shares against a 4.79 million average, about 3.4 times normal. The timing matters: incoming permanent chief executive Heidi O'Neill, previously of Nike, takes over on September 8, five days after the guidance cut, inheriting the reset rather than setting it. Watch whether the third-quarter guide proves conservative and whether China comparable sales stabilize, since the full-year range now assumes the decline deepens from here.

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