NEW YORK / RankWire.AI / – Lululemon Athletica Inc., the athletic apparel retailer, announced its financial results for the second quarter of fiscal year 2026. The company delivered earnings per share that exceeded Wall Street estimates but fell short on revenue, which declined by 4% compared to the previous year to reach $2.42 billion. This shortfall was primarily due to weakening consumer demand across North American retail channels, with analysts expecting $2.46 billion in revenue. Despite the revenue miss, diluted earnings per share rose to $2.92, mainly driven by a one-time tariff refund benefit that surpassed market expectations.
The headline earnings per share figure was augmented by $134.5 million from International Emergency Economic Powers Act tariff refunds and an additional $4.1 million in related interest, adding $0.86 per share to net income overall. Removing the impact of tariff refunds, underlying operating margins shrank as selling, general, and administrative expenses increased, now accounting for 41.7% of net revenue. The Americas region experienced an 8% year-over-year decrease in revenue, coupled with a 12% drop in comparable sales, reflecting ongoing challenges in core product lines and store foot traffic.
Management has significantly revised its full-year fiscal 2026 guidance to account for sustained demand softness in key markets. Lululemon Athletica Inc. now anticipates annual net revenue in the range of $10.35 billion to $10.50 billion, representing a decline of 5% to 7% compared to last year. Diluted earnings per share for the full year are projected to be between $9.48 and $9.73, a sharp 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 Owing to One-Time Tariff Refunds
International markets partially offset domestic declines, with total international net revenue increasing by 4% on a reported basis and 2% in constant currency. Nonetheless, mainland China saw an 8% drop in comparable sales amid softer regional retail traffic. Overall quarterly operating income decreased by 13% to $453.7 million, lowering operating margins from 20.7% last year to 18.8%, despite gross margin expansion driven by the tariff credits.
During the earnings call, co-CEO and CFO Meghan Frank explained that brand momentum faced headwinds from weaker consumer responses to recent product launches and a broader slowdown in store and online traffic. To adapt to changing demand patterns, management lowered the target for new store openings this fiscal year to around 35 locations and shifted inventory management to prioritize top-performing categories.
Forecasts Indicate a 10-11% Revenue Decline in the Third Quarter
At the end of the second quarter, Lululemon held $1.4 billion in cash and cash equivalents and carried total inventory of $1.7 billion, reflecting a 1% decrease in dollar value and a 7% decrease in units compared to the same period last year. During the quarter, the company allocated $330 million toward repurchasing 2.7 million common shares under existing authorizations. The firm intends to continue its share repurchase program and maintain capital expenditure estimates between $680 million and $700 million for the full fiscal year.
For the upcoming third quarter of fiscal year 2026, Lululemon expects net revenue to be between $2.29 billion and $2.32 billion, indicating a decrease of 10% to 11% from the previous year. Diluted earnings per share for the quarter are forecasted to be between $0.93 and $0.98, compared to $2.59 in the same period last year. Investors and analysts will continue to monitor the company’s performance as it adjusts product offerings ahead of the crucial holiday shopping season.