NEW YORK / RankWire.AI / – Athletic apparel retailer Lululemon Athletica Inc. announced its financial results for the fiscal second quarter of 2026, exceeding Wall Street expectations with earnings per share but missing revenue projections. The company’s net revenue fell 4% year-over-year to $2.42 billion, short of analyst estimates of $2.46 billion, due to weakening consumer demand across North American retail outlets. Despite this revenue shortfall, diluted earnings per share reached $2.92, surpassing analyst consensus mainly because of a one-time tariff refund benefit.
The headline earnings per share figure was bolstered by $134.5 million in tariff refunds under the International Emergency Economic Powers Act and an additional $4.1 million in related interest, collectively adding $0.86 per share to net income. When excluding this tariff relief, core operating margins shrank as selling, general, and administrative expenses increased to 41.7% of net revenue. Revenue in the Americas region declined 8% year-over-year, with a 12% decrease in comparable sales, reflecting ongoing challenges in key product lines and store traffic.
Management has significantly lowered its full-year fiscal 2026 guidance, citing persistent demand softness in major markets. Lululemon Athletica Inc. now expects full-year net revenue to be between $10.35 billion and $10.50 billion, representing a decline of 5% to 7% compared to the previous year. The forecasted diluted earnings per share for the full year range from $9.48 to $9.73, down sharply from $13.26 in fiscal 2025. Following the announcement, the company’s shares dropped nearly 18% in after-hours trading.
Lululemon’s Earnings Surpass Expectations Thanks to One-Time Tariff Refund
International markets helped offset some of the domestic revenue declines, with total international net revenue increasing by 4% on a reported basis and 2% in constant currency. However, comparable sales in mainland China fell 8%, as regional retail traffic slowed. Overall quarterly operating income declined 13% to $453.7 million, which caused operating margins to shrink to 18.8% from 20.7% last year despite gross margin expansion driven by tariff credits.
In the earnings call, interim co-Chief Executive Officer and Chief Financial Officer Meghan Frank explained that brand momentum faced headwinds from softer consumer response to new product launches and overall declines in physical and digital store traffic. In response, management lowered its net new store openings target to around 35 locations for the fiscal year and shifted inventory strategies to prioritize best-performing categories.
Forecasts Indicate a 10–11% Revenue Drop in the Third Quarter
At the end of the second quarter, the retailer held $1.4 billion in cash and cash equivalents, with total inventory totaling $1.7 billion—down 1% in dollar value and 7% in units compared to the prior-year period. During this period, the company allocated $330 million to repurchasing 2.7 million common shares under existing authorizations. It plans to continue executing its share buyback program while maintaining capital expenditure estimates between $680 million and $700 million for the entire fiscal year.
For the third quarter of fiscal 2026, Lululemon projects net revenue will fall between $2.29 billion and $2.32 billion, a decrease of 10% to 11% year-over-year. Diluted earnings per share are expected to range from $0.93 to $0.98, compared to $2.59 in the third quarter of fiscal 2025. Investors and analysts will closely watch upcoming operational metrics as the company adjusts its product strategy ahead of the critical holiday shopping period.