Lululemon (LULU) Fiscal Q2 2026 Earnings Call: Guidance Cut as Revenue Falls
Source Tradingkey
Key Takeaways
- Fiscal Q2 2026 net revenue fell 4% year over year to $2.4 billion, or 5% in constant currency. Comparable sales declined 10%.
- North America revenue decreased 8%, while China Mainland grew 4% on a reported basis but declined 2% in constant currency. Rest of World revenue increased 5%, or 6% in constant currency.
- Diluted EPS was $2.92, down from $3.10. The result included an $0.86 per-share benefit from tariff refunds and associated interest, net of tax.
- Product performance remained inconsistent. Women’s leggings sales declined approximately 20%, while Groove, Define, Scuba and selected away-from-body bottoms showed stronger demand.
- Management lowered full-year 2026 revenue guidance to $10.35 billion-$10.5 billion, representing a 5%-7% decline, and reduced diluted EPS guidance to $9.48-$9.73.
- Management said traffic pressure was the primary weakness in both North America and China Mainland. The company is increasing marketing investment while tightening expenses and reducing planned net new store openings.
Key Financial Data
| Metric | Fiscal Q2 2026 | Year-over-year change / context |
|---|---|---|
| Net revenue | $2.4 billion | Down 4%; down 5% in constant currency |
| Comparable sales | — | Down 10% |
| North America revenue | — | Down 8%; comparable sales down 12% |
| China Mainland revenue | — | Up 4% reported; down 2% constant currency; comparable sales down 8% |
| Rest of World revenue | — | Up 5% reported; up 6% constant currency; comparable sales down 3% |
| Digital revenue | $0.9 billion | Down 6%; 39% of total revenue |
| Gross profit | $1.46 billion | Gross margin of 60.5%, up 200 basis points |
| Operating income | $454 million | Operating margin of 18.8%, versus 20.7% a year earlier |
| Net income | $329 million | — |
| Diluted EPS | $2.92 | Versus $3.10; included an $0.86 tariff-refund benefit |
| Cash and equivalents | $1.4 billion | Quarter-end balance |
| Inventory | $1.7 billion | Down 1% in dollars and approximately 7% in units |
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