Lululemon Slashes Full-Year Outlook on Weakening Sales; Shares Plunge

Lululemon Athletica Inc. (LULU) sharply reduced its full-year revenue and profit forecasts after missing second-quarter sales estimates, signaling significant headwinds for its incoming chief executive. The announcement sent the company's shares plunging in extended trading on Thursday.

Guidance Cut Amid Sales Decline

The apparel maker now expects fiscal 2026 revenue to decline by 5% to 7%, a substantial downgrade from its prior forecast of revenue remaining flat or falling by up to 1%. Lululemon also slashed its full-year earnings per share guidance to a range of $9.48 to $9.73, down from a previous forecast of $10.95 to $11.15.

The revised outlook follows a disappointing second-quarter performance where revenue came in at $2.42 billion, below the $2.46 billion average analyst estimate compiled by LSEG. The shortfall was driven by deteriorating sales in key regions:

• Americas: Revenue fell 8%, a stark reversal from the 1% growth recorded a year ago.
• China: Sales declined 2% in constant dollars, a significant slowdown from the 24% increase a year earlier.

New CEO Faces Turnaround Challenge

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The grim forecast presents a major challenge for incoming CEO Heidi O’Neill, a Nike veteran who is scheduled to take leadership next week. Investor focus will be on her strategy to revive momentum amid what analysts cite as strategic missteps, lackluster product innovation, and intense competition from brands like Alo Yoga and Vuori.

Despite the sales weakness, Lululemon's second-quarter gross margin increased by 200 basis points to 60.5%. The company noted this was primarily due to a one-time benefit of $134.5 million in tariff refunds and associated interest, not an improvement in underlying operational performance.

Market Reaction

Shares of the Vancouver-based company tumbled approximately 18% in after-hours trading following the release. The stock has struggled throughout the year, having already declined nearly 69% in 2025.