#A Beat Boosted by a Tariff Refund
Lululemon's headline numbers looked like a win at first glance. Diluted earnings per share of $2.92 for the second quarter of fiscal 2026 cleared what analysts had modeled. But the figure came with an asterisk. The company booked $134.5 million in tariff refunds under the International Emergency Economic Powers Act, plus $4.1 million in related interest, together adding $0.86 to that per-share number. Excluding that benefit, EPS would have been roughly $2.06 a share, down sharply from $3.10 a year earlier.
Net revenue fell 4% to $2.4 billion, or 5% on a constant-currency basis, and global comparable sales dropped 9%, or 10% in constant-currency terms. Investors did not wait for the fine print. Shares plunged around 20% in Friday premarket trading, extending a decline that has now wiped out roughly 42% of the stock's value this year.
#Where the Weakness Is Concentrated
Americas comparable sales fell 12% and Americas net revenue dropped 8%, in a region that still generates two-thirds of total sales. Within the product lineup, women's apparel revenue fell 4%, and leggings, long the brand's signature category, saw sales drop 20%. Management pointed to soft store traffic and a weaker than expected response to new launches.
China Mainland net revenue rose 4% in dollar terms but fell 2% in constant currency, with comparable sales down 8% amid negative commentary following a promotional event on the Great Wall that featured a Japanese taiko drum. Rest of World net revenue was the bright spot, up 5%, or 6% in constant currency.
A sharper way to see the markets in just 5 minutes.
Same news, different lens. We cut through the noise and hand you the overlooked ideas and the deeper read the crowd misses. Join 38,000+ investors seeing the markets differently.
#A Guidance Cut and a Long Wait for New Leadership
Lululemon lowered its full year outlook meaningfully, to net revenue of $10.35 billion to $10.5 billion, a decline of 5% to 7%, with diluted EPS guidance cut to $9.48 to $9.73 from a prior $10.95 to $11.15. Third quarter revenue is guided down 10% to 11%, sharper than the second quarter itself.
The company named Heidi O'Neill, a 27 year Nike veteran, as incoming CEO on April 22, but her start date does not arrive until September 8, more than four months later. In the interim, co-CEOs Meghan Frank and André Maestrini, both holdovers from prior leadership, have been running the company. Operating margin fell to 18.8% from 20.7% despite the tariff refund's boost, and SG&A rose to 41.7% of revenue as marketing, labor, and proxy contest costs climbed while sales shrank.
Wall Street's reaction was skeptical rather than reassured. Guggenheim analyst Simeon Siegel warned the update looked like "yet another along a stretch of a thousand cuts, rather than kitchen sink," suggesting more downside may still be ahead. Jefferies analyst Randy Konik put it more bluntly, saying "there are plenty more lemons to squeeze before this one turns."
The bull case is that a fresh product cycle and O'Neill's operating experience eventually reverse the traffic slide, helped by an international business that is still growing. The bear case is that lululemon's brand problem at home is deeper than a new CEO can fix quickly, and that one time tariff refunds will not keep flattering results indefinitely. This week, the market clearly leaned toward the latter.