NEW YORK / RankWire.AI / – In its fiscal second quarter of 2026, Lululemon Athletica Inc. announced earnings per share that exceeded Wall Street expectations but fell short on revenue. Revenue dropped 4% year-over-year to $2.42 billion, missing analyst estimates of $2.46 billion due to decreasing consumer demand in North American retail channels. Despite the revenue shortfall, diluted earnings per share reached $2.92, surpassing forecasts mainly thanks to a one-time tariff refund benefit.
The company’s reported earnings per share were boosted by $134.5 million in International Emergency Economic Powers Act tariff refunds and $4.1 million in related interest, together adding $0.86 per share to net income. Adjusting for the tariff refunds, operating margins contracted as selling, general, and administrative expenses increased to 41.7% of net revenue. Americas revenue declined by 8% compared to the previous year, with a 12% decrease in comparable sales, indicating ongoing challenges with core products and store traffic.
As a result of persistent demand softness, management has significantly lowered its full-year fiscal 2026 guidance. Lululemon Athletica Inc. now expects total net revenue for the year to be between $10.35 billion and $10.50 billion, representing a decline of 5% to 7% compared to last year. The company’s forecasted full-year diluted earnings per share are between $9.48 and $9.73, a sharp drop from $13.26 in fiscal 2025. Following this update, shares declined nearly 18% in after-hours trading.
Lululemon’s Quarterly Profit Boosted by Unique Tariff Refund
International regions helped offset some domestic losses, with total international net revenue increasing 4% on reported basis and 2% in constant currency. Mainland China’s comparable sales fell 8%, reflecting moderated retail foot traffic in the region. Quarterly operating income declined 13% to $453.7 million, reducing operating margins from 20.7% in the same period last year to 18.8%, despite gross margin improvements driven by tariff credits.
During the earnings call, interim co-CEO and CFO Meghan Frank explained that brand momentum was hindered by softer consumer responses to new product launches and broader declines in physical and digital store traffic. To adapt to changing demand, the management team cut its store opening target to about 35 locations for the year and shifted inventory strategies to prioritize top-performing categories.
Q3 Revenue Expected to Drop by 10% to 11% Year-Over-Year
By the end of the second quarter, the retailer held $1.4 billion in cash and cash equivalents, with total inventory amounting to $1.7 billion—down 1% in dollar value and 7% in units from last year. The quarter’s capital allocation included $330 million spent on repurchasing 2.7 million common shares under existing programs. The company plans to continue executing its buyback program while maintaining capital expenditure estimates between $680 million and $700 million for the entire fiscal year.
Looking ahead to the third quarter of fiscal 2026, Lululemon anticipates net revenue between $2.29 billion and $2.32 billion, reflecting a decrease of 10% to 11% year-over-year. Diluted earnings per share for the quarter are projected to be between $0.93 and $0.98, compared to $2.59 in the same period last year. Analysts and investors will continue monitoring the company’s performance as it adjusts its product offerings in anticipation of the upcoming holiday shopping season.