Lululemon (LULU) earnings Q1 2026

Lululemon‘s troubles are removed from over. 

The athletic attire retailer lowered its full-year steerage and issued a weak present quarter outlook on Thursday as interim CEO Meghan Frank blamed “destructive commentary within the media” and up to date product launches that didn’t wow consumers.

“We skilled spikes of destructive commentary within the media and on social channels with regard to our model, which had an impression on visitors and general prime line efficiency,” Frank advised analysts through the firm’s earnings name whereas explaining why the corporate’s efficiency declined on the finish of its fiscal first quarter. “And second, not all of our product launches have met our expectations. Whereas we have had a number of profitable launches up to now this 12 months, we have seen others as we begin Q2 not generate the anticipated visitor response.”

When pressed on what particular destructive commentary led to a decline in gross sales, Frank pointed to Lululemon’s proxy contest with founder Chip Wilson, who was outspoken in his criticism of the model, in addition to “questions in regards to the composition” of a few of its merchandise.

“These tales have died down and subsided,” stated Frank. “However we now have not but seen a return to our pre-disruption … developments.”

She stated the corporate is “not sitting nonetheless” and is “transferring with urgency to make the required changes to re-accelerate momentum, significantly in North America.”

The corporate’s shares dropped 11% in prolonged buying and selling following the report. Lululemon’s inventory has plunged about 40% this 12 months as of Thursday’s shut.

Lululemon is now anticipating fiscal 2026 gross sales to be between $11 billion and $11.15 billion, down from a earlier vary of between $11.35 billion and $11.50 billion. Analysts have been anticipating full-year gross sales of $11.48 billion, in accordance with LSEG. 

Lululemon additionally minimize its earnings steerage by greater than $1 per share. It is now anticipating earnings per share to be between $10.95 and $11.15 for the 12 months, down from a earlier vary of $12.10 to $12.30. Analysts have been anticipating $12.30 per share, in accordance with LSEG. 

The present quarter does not look a lot better. Lululemon is anticipating gross sales to be between $2.45 billion and $2.48 billion, beneath expectations of $2.60 billion, in accordance with LSEG. It is anticipating earnings per share to be between $1.76 and $1.81, properly beneath expectations of $2.68, in accordance with LSEG. 

Whereas Lululemon’s steerage failed to satisfy forecasts, it did beat expectations on the highest and backside traces throughout its fiscal first quarter, albeit on expectations which have come down considerably for the reason that retailer final reported earnings. Here is how the corporate carried out in contrast with what Wall Road was anticipating, primarily based on a survey of analysts by LSEG:

• Earnings per share: $1.69 vs. $1.68 anticipated 
• Income: $2.47 billion vs. $2.43 billion anticipated 

The corporate’s reported web earnings for the three-month interval that ended Might 3 was $195.0 million, or $1.69 per share, in contrast with $314.6 million, or $2.60 per share, a 12 months earlier.  

Gross sales rose to $2.47 billion, up about 4% from $2.37 billion a 12 months earlier. Comparable gross sales grew 1%, higher than expectations of 0.4%, in accordance with LSEG.

Lululemon’s woes have been centered on the Americas, its largest and most essential area. In the course of the quarter, comparable gross sales fell 5% available in the market, marking the fifth straight quarter of declines. Lululemon’s general enterprise remains to be rising, but it surely has primarily seen that enlargement in China and in different worldwide areas, which make up a fraction of general income. 

In the course of the quarter, worldwide gross sales grew 22% whereas worldwide comparable gross sales grew 13%.

Lululemon stated it expects its declines in North America to proceed. It anticipates gross sales will fall by a low-double digit share within the present quarter and by a high-single digit share for the total 12 months. In the meantime, it expects China gross sales will rise by a mid-to-high teenagers share through the present quarter and by about 20% for the total 12 months.

Gross sales have been a sore spot for Lululemon, however profitability has been a good bigger problem. In the course of the quarter, gross margin decreased a staggering 4.1 share factors to 54.2%, worse than expectations of 54.6%, in accordance with StreetAccount. The corporate was a big beneficiary of the now defunct de minimis exemption, which allowed it to ship packages responsibility free throughout the Canadian border into the U.S., and has additionally been hit exhausting by tariffs.

With fewer folks coming to its shops and web site to purchase exercise garments, the corporate has additionally leaned extra on discounting to drive gross sales, which has harm its backside line and its repute as a premium model.

It is also spent the final six months in a dramatic proxy contest with its founder, which was pricey and took administration’s consideration away from its turnaround.

Along with all of these struggles, Lululemon, like everybody else, has additionally needed to deal with a brand new battle within the Center East and surging gasoline costs, that are additionally rising prices.

The corporate stated the decline in its gross margin through the quarter was primarily attributable to tariffs, which impacted margins by 2.8 share factors, and reductions, which grew 0.4 share factors. The corporate expects gross margin to fall by one other 4.1 share factors through the present quarter, pushed by greater tariffs and retailer investments. It anticipates markdowns will probably be 0.5 share factors greater. 

“Whereas we proceed to anticipate markdowns to enhance modestly 12 months over 12 months within the second half,” stated Frank. “The slower anticipated prime line developments in Q2 will necessitate further seasonal clearance.”

Lululemon expects its profitability challenges will average within the again half of the 12 months. For the total 12 months, the corporate anticipates gross margin will fall 0.9 share factors, with markdowns flat to barely greater. On a full-year foundation, Lululemon expects to offset almost all of its tariff impression, Frank stated.  

Within the three months since Lululemon final reported earnings, its made some progress on addressing a few of its challenges. It employed longtime Nike veteran Heidi O’Neill to be its subsequent CEO and settled its proxy battle with its founder. Traders are more likely to be relieved Lululemon’s administration staff now not has to place its focus and money behind the proxy contest, however some are nonetheless feeling bitter over O’Neill’s appointment, significantly as a result of she will not have the ability to begin till September. 

Beneath the course of two interim CEOs, CFO Frank and Chief Industrial Officer André Maestrini, Lululemon has been working to rebuild its product assortment and tackle its home progress problem. However the actual technique adjustments will not come till O’Neill begins. 

Given how lengthy it takes for Lululemon to get from product concept to market, there’s concern that it will take even longer than anticipated to repair the challenges which have been weighing on its enterprise. 

Nonetheless, Lululemon has contended that O’Neill is the correct individual for the job. Whereas at Nike, O’Neill established and constructed Nike’s ladies’s enterprise and grew it right into a multibillion-dollar franchise. She additionally labored to scale back product lead occasions – expertise that can serve her as Lululemon’s chief govt. Already, the corporate has made progress in decreasing lead occasions from 18-to-24 months to 15-to-16 months and is working to additional convey it right down to between 12 and 14 months, Frank stated.