NEW YORK / RankWire.AI / – In its fiscal second quarter of 2026, Lululemon Athletica Inc. reported earnings per share that exceeded Wall Street expectations, even as revenue missed forecasts. The company’s net sales fell by 4% year-over-year to $2.42 billion, short of the analyst consensus estimate of $2.46 billion, amid decreasing consumer demand across North American retail channels. Despite this revenue shortfall, diluted earnings per share reached $2.92, surpassing expectations mainly due to a one-time tariff refund benefit.
The top-line boost was primarily driven by $134.5 million in tariff refunds under the International Emergency Economic Powers Act and an additional $4.1 million in related interest, which together contributed $0.86 per share to net income. When excluding this tariff relief, underlying operating margins contracted, with selling, general, and administrative expenses rising to 41.7% of net revenue. Revenue in the Americas region dropped 8% compared to the previous year, alongside a 12% decline in comparable sales, indicating ongoing headwinds in core product categories and store traffic.
As a result of persistent demand softness in key markets, management has significantly cut its full-year fiscal 2026 guidance. Lululemon Athletica Inc. now anticipates total net revenue between $10.35 billion and $10.50 billion, reflecting a decline of 5% to 7% year-over-year. The company also projects full-year diluted earnings per share in the range of $9.48 to $9.73, sharply lower than the $13.26 reported in fiscal 2025. Following the announcement, shares fell nearly 18% in after-hours trading.
Lululemon’s Earnings Surpass Expectations Thanks to One-Time Tariff Refunds
International markets partially offset domestic declines, with total international net revenue increasing by 4% on a reported basis and 2% in constant currency. However, regional retail traffic in mainland China decreased by 8%, leading to a decline in comparable sales. Total operating income for the quarter decreased by 13% to $453.7 million, causing operating margins to fall to 18.8% from 20.7% in the same period last year, despite gross margin expansion driven by tariff credits.
During the earnings call, market analysts heard from interim co-Chief Executive Officer and Chief Financial Officer Meghan Frank that brand momentum faced challenges from softer consumer responses to some new product launches and overall declines in store and digital traffic. In response to evolving demand patterns, management has lowered its new store opening target for the fiscal year to around 35 locations and shifted inventory management strategies to prioritize top-performing categories.
Third Quarter Revenue Expected to Drop 10-11% Year-over-Year
At the end of the second quarter, the retailer held $1.4 billion in cash and cash equivalents, with total inventory of $1.7 billion—down 1% in dollar value and 7% in units compared to the previous year. During this period, $330 million was allocated toward repurchasing 2.7 million common shares under existing buyback programs. The company intends to continue executing its share repurchase plan while maintaining capital expenditure estimates between $680 million and $700 million for the full fiscal year.
For the third quarter of fiscal 2026, Lululemon expects net revenue between $2.29 billion and $2.32 billion, representing a decline of 10% to 11% from the previous year. Diluted earnings per share for the quarter are forecasted between $0.93 and $0.98, compared to $2.59 in the same period last year. Investors and analysts will keep a close eye on operational metrics as the company adjusts its product lineup ahead of the busy holiday shopping season.