Key Takeaways:
Lululemon shares plunged more than 18% pre-market after the retailer cut full-year profit and revenue guidance on weakening demand.
"We have taken a prudent approach to revising our full-year outlook," Interim co-CEO and CFO Meghan Frank said in a statement, as the company navigates "challenging dynamics."
Q2 revenue fell 4% to $2.42 billion, missing consensus estimates of $2.46 billion, while comparable sales dropped 9% — the steepest decline in the company's modern history. Americas revenue fell 8% with comparable sales down 12%, offsetting a 4% gain in international sales. Reported EPS of $2.92 included a $134.5 million tariff refund that added 86 cents a share; excluding that windfall, earnings were roughly $2.06.
The company now expects full-year revenue of $10.35 billion to $10.50 billion, down 5% to 7% from a prior range of $11 billion to $11.15 billion, and EPS of $9.48 to $9.73, cut from $10.95 to $11.15. Third-quarter revenue is forecast at $2.29 billion to $2.32 billion, down 10% to 11%, with EPS of 93 cents to 98 cents. Shares fell below $100 in after-hours trading, the first time since 2018, and are down 41% year to date.
Frank attributed the shortfall to negative media and social commentary that hurt traffic, inconsistent response to new product launches, and a roughly 20% decline in leggings sales — the category that built the brand. In China, revenue grew 4% but comparable sales fell 2% after a Great Wall marketing event drew backlash and Tmall's 618 festival softened. The company trimmed planned net new store openings to about 35 from 40 and ended the quarter with 825 locations and $1.4 billion in cash.
The results land days before Heidi O'Neill, a nearly 30-year Nike veteran, takes over as CEO on Sept. 8, inheriting a company run by interim co-CEOs for seven months. Founder Chip Wilson waged a proxy battle this year and added two allies to the board. Lululemon faces intensifying competition from upstarts Alo and Vuori, while Dick's Sporting Goods earlier warned of a promotional environment across athletic retail.
The guidance cut signals management expects the slowdown to persist into the holiday quarter, with Q3 operating margin forecast to compress to about 6.5% from 17% a year earlier. Investors will watch whether peer apparel retailers issue similar warnings in coming sessions and whether O'Neill's turnaround plan takes hold by next year's results.
This article is for informational purposes only and does not constitute investment advice.
