NEW YORK / RankWire.AI / – Athletic apparel retailer Lululemon Athletica Inc. announced its financial results for the second quarter of fiscal year 2026, showing earnings per share that exceeded Wall Street expectations but missing revenue estimates. Revenue decreased by 4% year-over-year to $2.42 billion, falling short of analysts’ consensus of $2.46 billion, mainly due to weakening consumer demand across retail channels in North America. Despite this revenue shortfall, diluted earnings per share reached $2.92, outperforming analyst projections largely because of a one-time tariff refund benefit.
The reported earnings per share figure was positively influenced by $134.5 million in tariff refunds under the International Emergency Economic Powers Act and $4.1 million in related interest, which together added $0.86 per share to net income. When excluding the tariff relief, underlying operating margins shrank as selling, general, and administrative expenses grew to 41.7% of net revenue. Revenue in the Americas region declined by 8% compared to the prior year, alongside a 12% decrease in comparable sales within the region, reflecting persistent challenges in core product categories and store traffic.
The company has significantly lowered its full-year fiscal 2026 guidance to account for ongoing demand softness in key markets. Lululemon Athletica Inc. now forecasts full-year net revenue between $10.35 billion and $10.50 billion, indicating a decline of 5% to 7% year-over-year. The projected full-year diluted earnings per share are between $9.48 and $9.73, a notable decrease from $13.26 in fiscal 2025. Following this announcement, the company’s shares dropped nearly 18% during extended after-hours trading.
Lululemon’s Earnings Surpass Expectations Thanks to a One-Time Tariff Refund
International markets helped partially offset domestic declines, with total international net revenue increasing by 4% on a reported basis and 2% in constant currency. However, comparable sales in mainland China fell 8% as regional retail traffic slowed. Overall quarterly operating income decreased by 13% to $453.7 million, leading to a reduction in operating margins from 20.7% in the previous year to 18.8%, despite gross margin expansion driven by the tariff credits.
During the earnings call, market analysts heard interim co-Chief Executive Officer and Chief Financial Officer Meghan Frank mention that brand momentum was challenged by softer consumer responses to some new product launches and a broader decline in store and online traffic. In response to changing demand patterns, management lowered its net new store opening target for the fiscal year to approximately 35 locations and adjusted inventory strategies to prioritize top-performing product categories.
Third Quarter Revenue Expected to Drop by 10–11% Year-over-Year
At the end of the second quarter, the retailer held $1.4 billion in cash and cash equivalents, with total inventory at $1.7 billion—down 1% in dollar value and 7% in units from the same period last year. Capital expenditures during the quarter included $330 million allocated for repurchasing 2.7 million common shares under existing authorization programs. The company intends to continue its share buyback program while maintaining capital expenditure guidance between $680 million and $700 million for the full fiscal year.
For the third quarter of fiscal 2026, Lululemon projects net revenue to be between $2.29 billion and $2.32 billion, reflecting a 10% to 11% decline compared to the same quarter in the previous year. Diluted earnings per share are expected to range from $0.93 to $0.98, compared to $2.59 in the third quarter of fiscal 2025. Investors and analysts will closely observe performance metrics as the company adjusts its product offerings ahead of the upcoming holiday shopping season.