Lululemon Stock Plunges 18% After Revenue Miss and Outlook Cut

Key Takeaways

• Lululemon shares fell nearly 18% in after-hours trading, dropping below $100 after second-quarter revenue missed expectations.
• Revenue declined 4% to $2.42 billion, while comparable sales fell 9%, including a 12% decline in the Americas.
• The company cut its fiscal 2026 revenue forecast to $10.35–$10.50 billion and expects third-quarter sales to decline by 10%–11%.

Lululemon Stock Falls Below $100 After Q2 Results

source: googlefinance

Lululemon Athletica shares plunged nearly 18% in extended trading on Thursday, September 3, after the athletic apparel company reported weaker-than-expected second-quarter sales and sharply reduced its full-year outlook.

LULU stock fell to around $100 after closing the regular session 1.4% higher at $121.77. The decline pushed the shares below their previous 52-week low and extended a sell-off that had already erased more than 40% of the stock’s value in 2026.

Revenue for the fiscal quarter ended August 2 declined 4% year over year to $2.416 billion. That was below both the company’s previous guidance of $2.45–$2.475 billion and the approximately $2.46 billion expected by analysts.

Comparable sales, which include established stores and e-commerce operations, decreased 9% on a reported basis and 10% in constant-currency terms. The scale of the decline raised concerns that Lululemon’s current product and marketing initiatives have not yet generated a meaningful recovery in customer demand.

Americas Sales Remain the Main Pressure Point

The Americas continued to produce the weakest regional performance. Revenue in the region declined 8%, while comparable sales fell 12%.

This represented a further deterioration from the first quarter, when Americas revenue declined 3% and comparable sales fell 5%. The sequential weakness suggests that the company is still struggling with softer traffic, inconsistent demand for new products and growing competition in its largest market.

International revenue increased 4% on a reported basis but rose only 2% in constant currencies. Comparable international sales declined 3%, or 6% after adjusting for exchange-rate movements.

China Mainland revenue increased 4% in reported terms but decreased 2% on a constant-currency basis. Comparable sales in the market fell 2%, or 8% in constant currencies. The figures show that currency movements masked underlying weakness in a region that had previously been one of Lululemon’s most reliable growth drivers.

Across the company, revenue from women’s products declined 4%, men’s revenue fell 1%, and accessories and other products dropped 13%. Store and digital revenue each declined 6%, indicating that the slowdown was not limited to one sales channel.

Tariff Refunds Support Headline Earnings

Diluted earnings per share came in at $2.92, down from $3.10 a year earlier but above market expectations. However, the headline result received substantial support from a one-time tariff refund.

Lululemon recorded $134.5 million of tariff refunds and $4.1 million of associated interest during the quarter. The company estimated that these items added $0.86 per share to diluted earnings.

The refunds also increased gross margin by 560 basis points. As a result, reported gross margin rose 200 basis points to 60.5%, even though the underlying business continued to face cost and demand pressures.

Operating income declined 13% to $453.7 million, while operating margin narrowed to 18.8% from 20.7%. Net income decreased to $329.2 million from $370.9 million.

Selling, general and administrative expenses rose to 41.7% of revenue from 37.7% a year earlier, reflecting the effect of lower sales and continued spending on marketing, employees and store operations. These figures help explain why investors focused on the revenue miss and weaker outlook rather than the better-than-expected EPS figure.

Lululemon Cuts Its Fiscal 2026 Outlook

Lululemon now expects fiscal 2026 revenue of $10.35–$10.50 billion, representing a decline of 5%–7% from the previous year.

The company had previously forecast revenue of $11.00–$11.15 billion, equivalent to performance ranging from flat to a 1% decline. The revised range therefore reduced the midpoint of the annual sales forecast by approximately $650 million.

Full-year diluted EPS guidance was cut to $9.48–$9.73 from $10.95–$11.15. The new forecast includes the $0.86-per-share benefit from the second-quarter tariff refund, making the underlying reduction in expected earnings more significant.

The near-term outlook also pointed to further weakness. Third-quarter revenue is expected to reach $2.29–$2.32 billion, a year-over-year decline of 10%–11%, while diluted EPS is forecast at $0.93–$0.98.

The company ended the quarter with $1.4 billion in cash. Inventory declined 1% in value and 7% in units, reducing some of the risk that weak demand could lead to a large build-up of unsold products. Lululemon also repurchased 2.7 million shares for $330 million during the quarter.

Heidi O’Neill Faces an Immediate Turnaround Test

Incoming CEO Heidi O’Neill is scheduled to take over on September 8. She will inherit a business facing declining North American sales, weakening international comparable sales and questions about whether its product range remains sufficiently distinctive.

O’Neill spent more than 25 years at Nike and most recently served as president of consumer, product and brand. Lululemon selected her partly for her experience in product development, brand strategy, digital commerce and global operations.

Interim management said the company remains focused on improving its product assortment, increasing marketing investment and controlling expenses. O’Neill is expected to review those plans after taking over, but meaningful product changes may require several development and selling cycles before they materially affect revenue.

Michael Burry Remains Committed Despite the Sell-Off

Michael Burry described Lululemon as “the trickster in my portfolio” following the earnings release but indicated that he remained willing to increase his position if the shares continued trading below $100.

His comments provided a contrasting long-term view of the company, but claims that Lululemon represents approximately 17% of his current portfolio or that his average purchase price is around $240 cannot be independently confirmed through recent public regulatory filings. Those figures should therefore be treated as estimates rather than verified portfolio data.

Burry’s continued interest may attract attention from value-focused investors, but it does not remove the operational risks reflected in Lululemon’s latest results.

What Is Next for Lululemon Stock?

The sharp after-hours decline shows that the market is demanding clearer evidence of a turnaround. The main indicators to watch are Americas traffic, comparable sales, customer response to new products and the performance of China Mainland after adjusting for currency movements.

Lululemon still has a substantial cash position, a globally recognised brand and room for international expansion. However, the reduced guidance indicates that management does not expect a rapid improvement during the second half of fiscal 2026.

The next major test will be whether Heidi O’Neill can restore product momentum without relying on heavier discounting. Until sales trends stabilise, LULU stock may remain sensitive to updates on traffic, margins and the pace of the company’s turnaround.