lululemon athletica Q2 Earnings Call Highlights

Sales and comparable performance weakened: Second-quarter revenue fell 4% year over year to $2.4 billion, while comparable sales declined 10%. North America and China Mainland were pressured by weaker traffic, negative brand sentiment and inconsistent product launches.

Product demand was mixed: Women’s leggings sales dropped approximately 20% as consumers shifted toward looser silhouettes, while newer wide-leg styles, select apparel franchises and golf products performed better. Lululemon is reducing SKUs, improving inventory management and increasing replenishment of stronger sellers.

Outlook was cut sharply: The company expects third-quarter revenue to decline 10%–11% and now forecasts full-year 2026 revenue of $10.35 billion–$10.5 billion, with diluted EPS of $9.48–$9.73. Management plans to increase marketing, tighten expenses and reduce planned new store openings to about 35.

Lululemon athletica NASDAQ: LULU reported second-quarter revenue and earnings that fell below its expectations, citing weaker traffic, inconsistent product launches and pressure on brand sentiment in North America and China Mainland. The company lowered its full-year outlook and said it is increasing marketing investment while tightening expenses and inventory management.

Total second-quarter net revenue declined 4% year over year, or 5% on a constant-currency basis, to $2.4 billion. Comparable sales fell 10%. Net income was $329 million, or $2.92 per diluted share, compared with $3.10 per share in the prior-year quarter. Tariff refunds and associated interest added $0.86 per share to quarterly earnings, the company said.

North America revenue declined 8% in the second quarter, with comparable sales down 12%. U.S. revenue fell 8%, while Canada revenue declined 11% on a reported basis, or 9% in constant currency. China Mainland revenue rose 4% on a reported basis but declined 2% in constant currency, while comparable sales fell 8%.

Interim Co-CEO and CFO Meghan Frank said the company faced negative media and social-channel commentary beginning late in the first quarter and early in the second quarter. That was compounded by commentary following the company’s first-quarter call regarding an event held at the Great Wall of China.

Interim Co-CEO, President and Chief Commercial Officer André Maestrini said those factors hurt traffic in stores and digital channels. E-commerce was also affected by Tmall’s decision not to repeat its 618 Shopping Festival in the same manner as the prior year, as well as lululemon’s decision not to participate in promotions following the event.

Revenue in the company’s rest-of-world segment, consisting of EMEA and APAC, increased 5%, or 6% in constant currency, while comparable sales declined 3%. Maestrini said South Korea remained one of the company’s strongest markets, while Australia has become increasingly promotional. Lululemon has not joined those promotional events, which he said has slowed guest purchase behavior.

Frank said women’s leggings sales declined approximately 20% during the quarter, a greater-than-expected slowdown in a core category. While the company remains committed to leggings and described itself as the category’s market leader, it is seeing consumer demand shift toward away-from-body silhouettes. The company cited favorable performance from newer styles including Groove Wide-Leg, Align Foldover Jogger, Breezily and an updated Dance Studio Pant.