Lululemon Shares Plunge Over 17% After Q2 Revenue and Profit Decline

Lululemon Athletica Inc. (LULU) shares plunged more than 17% in pre-market trading on Thursday after the company reported a surprise decline in second-quarter revenue and profit, signaling significant headwinds in its key markets.

Disappointing Quarterly Results

In an unaudited report released on September 3, Lululemon disclosed that for the second quarter ending August 2, its net revenue fell 4% year-over-year to $2.42 billion. On a constant currency basis, the decline was 5%.

The company's profitability also weakened significantly during the period. Key figures from the release include:

• Net Income: Dropped approximately 11% to $329 million, down from $371 million in the same quarter last year.
• Diluted Earnings Per Share (EPS): Fell about 6% to $2.92 from $3.10 a year prior.

Weakness in Key Regions

Ad

The Americas, Lululemon's largest market contributing about 67% of total sales, was the primary source of the downturn. Revenue in the region decreased by 8% to $1.62 billion, while comparable sales fell by a steep 12%. In its 10-Q filing, the company attributed this to simultaneous declines in customer traffic, conversion rates, and average order value.

Growth also decelerated in Mainland China. While reported revenue in the region rose 4% to $407 million, this figure represented a 2% decline when measured on a constant currency basis. Comparable sales in China fell 8% on a constant currency basis, indicating a notable slowdown.

Market Reaction

Investors reacted sharply to the weak earnings report, sending the company's stock down over 17% to $100.30 in pre-market trading. Following the announcement, investment bank Piper Sandler cut its price target on Lululemon stock to $80 from $110.