Lululemon cuts FY2026 guidance, stock falls 7% after hours

Lululemon Athletica Inc. reported Q1 revenue of $2.47 billion, beating estimates, but cut its full-year outlook, sending shares down 7% in extended trading.

"We have been navigating headwinds that have led us to adjust our outlook for the full year," interim co-CEO Meghan Frank said in a statement.

The Vancouver-based athletic apparel maker now expects fiscal 2026 revenue of $11.00 billion to $11.15 billion, down from a prior range of $11.35 billion to $11.50 billion and below the $11.47 billion consensus. Full-year EPS guidance fell to $10.95-$11.15 from $12.10-$12.30, versus the $12.29 estimate. Q2 revenue of $2.45 billion to $2.48 billion also missed the $2.59 billion consensus.

The guidance cut shows deepening challenges in Lululemon's core North American market, where comparable sales declined 5% and total Americas revenue fell 3%. International revenue grew 22%, but that was insufficient to offset domestic weakness. The stock, already down 39% this year, now trades near its lowest valuation in years.

Gross margin contracted 410 basis points to 54.2% from 58.3% a year earlier, as the company relied more on discounts to move inventory. Operating income fell 37% to $276.9 million. Net income dropped to $195 million, or $1.69 per share, from $314.6 million, or $2.60 per share, a year ago.

The company faces a roughly $210 million operating income headwind from tariffs, which management explicitly excluded from its initial FY2026 guidance. Inventory rose 18% year over year, raising the risk of further markdowns in North America.

Lululemon named former Nike Inc. executive Heidi O'Neill as its next chief executive officer in April, though she will not assume the role until September. Until then, Frank and co-interim CEO André Maestrini continue to lead the company. Founder Chip Wilson recently ended a proxy fight with the board after securing two board seats.

The guidance cut signals that management expects the North American slowdown to persist through at least the current fiscal year. Investors will watch O'Neill's strategy update when she takes over in September for signs of a turnaround plan.

This article is for informational purposes only and does not constitute investment advice.