Vancouver‑based Lululemon Athletica announced on Thursday that it is revising its fiscal 2026 outlook downward for the second time this year. The company now expects revenue to fall between 5% and 7% from the prior year, a sharp shift from its earlier projection of flat‑to‑slight decline. Earnings per share are also being reduced to a range of $9.48‑$9.73, down from the previous $10.95‑$11.15 forecast.
Quarterly performance shows softening demand
Second‑quarter revenue came in at $2.42 billion, missing analysts’ consensus estimate of $2.46 billion compiled by LSEG. The shortfall reflects an 8% drop in sales across the Americas, where consumer sentiment weakened in August and retail sales lagged in July amid persistent inflation. In China, a market that had been a bright spot for the brand, revenue slipped 2% in constant dollars after a 24% year‑over‑year gain.
Despite the revenue decline, Lululemon’s gross margin improved by 200 basis points to 60.5%, helped by tariff refunds of $134.5 million and related interest of $4.1 million.
Share price reacts to the downgrade
Investors responded sharply, with the stock falling roughly 18% in extended trading. The decline adds to a broader downtrend; Lululemon shares have lost nearly 69% in 2025.
Incoming CEO faces a steep climb
Heidi O’Neill, a veteran of Nike, is slated to assume the chief executive role next week. She inherits a company that has just emerged from a contentious proxy battle with founder Chip Wilson. Analysts will be watching closely to see whether O’Neill can reverse the sales slowdown, re‑energize product innovation, and restore market share that has been eroded by newer competitors such as Alo Yoga and Vuori.
Strategic missteps and a perceived lack of fresh product ideas have been cited as key contributors to the recent performance dip. The company’s ability to address these issues will be critical as it navigates a challenging macroeconomic environment marked by stubborn inflation and shifting consumer preferences.
What this means for the broader apparel market
Lululemon’s outlook adjustment underscores the pressure facing premium athleisure brands. As consumers tighten discretionary spending, companies that rely on high‑priced apparel must balance price points with compelling new designs and stronger brand relevance. The revised guidance also signals that even well‑established players are not immune to the broader retail headwinds affecting the United States and global markets.
Stakeholders, including suppliers, investors, and retail partners, will be closely monitoring O’Neill’s first quarter as CEO for signs of strategic realignment and any initiatives aimed at recapturing growth momentum.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
