Lululemon Q2 net revenue drops 4 percent amidst challenging dynamics

US activewear brand Lululemon Athletica Inc. (Lululemon) reported a 4 percent decrease in net revenue to 2.4 billion dollars for the second quarter of 2026, ending August 2, 2026. On a constant dollar basis, net revenue fell 5 percent.

The company faced headwinds across key geographical regions, with Americas net revenue contracting 8 percent. International net revenue provided a partial offset, rising 4 percent, or 2 percent on a constant dollar basis.

Comparable sales declined 9 percent globally, or 10 percent on a constant dollar basis. The drop was led by a 12 percent fall in Americas comparable sales, while international comparable sales decreased 3 percent, or 6 percent on a constant dollar basis.

“While we continue to navigate some challenging dynamics, we are taking a prudent approach with our revised full-year outlook,” stated Lululemon interim co-chief executive officer and chief financial officer, Meghan Frank. “Our teams remain focused on accelerating growth by strengthening our product offerings, increasing our marketing investments, and maintaining disciplined expense management.”

Operating income decreases despite tariff refund boost

Gross profit for the quarter edged down 1 percent to 1.5 billion dollars, though gross margin expanded by 200 basis points to 60.5 percent. The expansion was aided by 134.5 million dollars in International Emergency Economic Powers Act (IEEPA) tariff refunds, which lifted gross margin by 560 basis points.

Income from operations dropped 13 percent to 453.7 million dollars, while operating margin contracted 190 basis points to 18.8 percent. The IEEPA tariff refunds added 560 basis points to operating margin.

Diluted earnings per share (EPS) were 2.92 dollars compared to 3.10 dollars in the second quarter of 2025.

Executives cite prudent stance ahead of leadership transition

Interim co-CEO, president, and chief commercial officer, André Maestrini, added: “We remain confident in our ability to take the right steps to strengthen our performance and deliver sustainable growth over time. We look forward to welcoming our incoming CEO, Heidi O'Neill, next week as we begin an exciting new chapter for the company.”

Revised full-year outlook

Lululemon ended the second quarter with 1.4 billion dollars in cash and cash equivalents, along with 593.7 million dollars in available capacity under its committed revolving credit facility.

During the period, Lululemon opened nine net new company-operated stores, bringing its total estate to 825 locations. The brand also repurchased 2.7 million of its own shares at a total cost of 330.0 million dollars.

For the third quarter of 2026, Lululemon projects net revenue between 2.29 billion dollars and 2.32 billion dollars, representing a year-over-year (YoY) decline of 10 percent to 11 percent. Diluted EPS is forecasted to range from 0.93 dollars to 0.98 dollars.

For the full year 2026, the company lowered its net revenue expectations to a range of 10.35 billion dollars to 10.50 billion dollars, reflecting a YoY drop of 5 percent to 7 percent. Full-year diluted EPS is anticipated to fall between 9.48 dollars and 9.73 dollars. The guidance includes the 0.86 dollars per share tariff refund benefit recorded in the second quarter, but excludes any potential future tariff refunds or share buybacks.