NEW YORK / RankWire.AI / – Athletic apparel company Lululemon Athletica Inc. released its financial results for the second quarter of fiscal year 2026, revealing earnings per share that exceeded Wall Street estimates but missing revenue expectations. The company’s net revenue decreased by 4% compared to the same period last year, totaling $2.42 billion, which fell short of analyst consensus of $2.46 billion due to waning consumer demand across retail outlets in North America. Despite this revenue shortfall, diluted earnings per share reached $2.92, surpassing forecasts mainly because of a one-time tariff refund benefit.
The positive impact on earnings per share was primarily due to $134.5 million in International Emergency Economic Powers Act tariff rebates and $4.1 million in related interest, which together added $0.86 per share to net income. Excluding the effect of these tariff refunds, core operating margins shrank, with selling, general, and administrative expenses rising to 41.7% of net revenue. Revenue from the Americas region declined 8% year-over-year, with comparable sales decreasing by 12%, indicating ongoing challenges in core product lines and store traffic.
In response to persistent demand softness, management has significantly lowered its full-year fiscal 2026 guidance. Lululemon Athletica Inc. now anticipates total net revenue for the year to fall between $10.35 billion and $10.50 billion, representing a decline of 5% to 7% compared to last year. The company expects full-year diluted earnings per share to be between $9.48 and $9.73, a notable drop from the $13.26 earned in fiscal 2025. Following this announcement, the company’s shares dropped nearly 18% during extended after-hours trading.
Lululemon’s Profit Boost Mainly Due to One-Time Tariff Rebate
International markets helped partly offset the declines in the domestic market, with total international net revenue increasing by 4% on a reported basis and 2% when measured in constant currency. However, retail traffic in mainland China decreased by 8%, leading to a drop in comparable sales. The company’s total operating income for the quarter fell 13% to $453.7 million, reducing operating margins from 20.7% last year to 18.8%, despite gross margin expansion driven by the tariff credits.
During the earnings conference call, market analysts noted that interim co-Chief Executive Officer and Chief Financial Officer Meghan Frank stated that brand momentum faced headwinds from softer consumer responses to some new product launches and a broad slowdown in store traffic across both physical and digital platforms. To adapt to these shifting demand patterns, management has cut its net new store openings for the year to approximately 35 locations and is adjusting inventory management strategies to prioritize top-performing categories.
Third Quarter Revenue Expected to Decline by Double Digits
At the end of the second quarter, the company held $1.4 billion in cash and cash equivalents, with total inventory valued at $1.7 billion—down 1% in dollar terms and 7% in units compared to the same period last year. During this period, capital expenditures included $330 million spent on repurchasing 2.7 million common shares under existing authorization 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.
Looking ahead to the third quarter of fiscal 2026, Lululemon projects net revenue will fall between $2.29 billion and $2.32 billion, representing a decrease of 10% to 11% year-over-year. Diluted earnings per share for this period are expected to be between $0.93 and $0.98, compared to $2.59 in the same quarter last year. Investors and industry analysts will closely monitor the company’s performance metrics as it adjusts its product offerings ahead of the crucial holiday shopping season.