Executive Summary

Q1 2026 delivered net revenue of $2.371B (+7% YoY, +8% constant currency) and diluted EPS of $2.60; results were essentially in line with consensus (Revenue: $2.370B estimate vs $2.371B actual; EPS: $2.603 estimate vs $2.60 actual) and at the high end of company guidance . Revenues/EPS consensus data: Values retrieved from S&P Global*.
Gross margin expanded 60 bps to 58.3% on lower product costs and better markdowns; SG&A deleveraged 170 bps to 39.8% largely due to an FX revaluation loss, compressing operating margin to 18.5% (-110 bps YoY) .
Americas comparable sales declined 2% (constant -1%) amidst U.S. store traffic softness, while International remained strong (+6% comps; China Mainland +8% constant-currency comps) .
Guidance: FY revenue maintained at $11.15–$11.30B, but FY EPS lowered to $14.58–$14.78 (from $14.95–$15.15); Q2 2026 guided to $2.535–$2.560B revenue and $2.85–$2.90 EPS, with margin headwinds from tariffs and foundational investments .
Key catalyst: Tariff headwinds and planned mitigation (modest strategic pricing and sourcing efficiencies) plus expanding distribution of high-profile product innovation (Align No Line) into all stores by fall; management emphasized agility, brand strength, and market-share gains despite a cautious U.S. consumer .

What Went Well and What Went Wrong

What Went Well

International momentum: Net revenue +19% (+20% constant) with China Mainland +22% constant and Rest of World +17% constant; total international comps +6% (+7% constant) .
Gross margin expansion: +60 bps YoY to 58.3%, ahead of guidance, driven by ~130 bps product margin improvement (lower costs, improved damages and markdowns) partially offset by FX and fixed-cost deleverage; “gross margin approximately flat” guidance was exceeded .
Product innovation and brand activations: Early success of Align No Line (initial 80 doors), Daydrift trouser sell-outs, Be Calm, Glow Up; “Summer of Align” campaign raised unaided U.S. brand awareness from mid-30s to 40% .

What Went Wrong

U.S. softness: Americas comps -2% (constant -1%), lower store traffic persisted into Q1; management noted a “more cautious, discerning consumer” and elevated promotional activity in the U.S. market .
SG&A deleverage and FX: SG&A rose to 39.8% of sales (+170 bps YoY), above guidance due to an FX revaluation loss; operating margin fell to 18.5% (-110 bps YoY) .
Inventory dollars up 23% to $1.652B (units +16%), pressured by higher average unit cost (AUC) from tariffs and FX; management expects dollar inventories to be up low‑20s in Q2 as mitigation actions phase in mostly in 2H .

Financial Results

Metric	Q3 2025	Q4 2025	Q1 2026
Revenue ($USD Billions)	$2.397	$3.611	$2.371
Diluted EPS ($USD)	$2.87	$6.14	$2.60
Gross Margin %	58.5%	60.4%	58.3%
Operating Margin %	20.5%	28.9%	18.5%
Comparable Sales (Total, YoY)	+4%	+3%	+1%

Q1 2026 Actual vs S&P Global Consensus	Revenue ($USD)	EPS ($USD)
Actual	$2,370,660,000	$2.60
Consensus	$2,369,546,560*	$2.60301*
Surprise	+$1.11M (≈+0.05%)*	-$0.003 (~-0.1%)*

Values retrieved from S&P Global*.

Regional/Channel KPI (Q1 2026)	Value
Americas Net Revenue Growth YoY	+3% (constant +4%)
International Net Revenue Growth YoY	+19% (constant +20%)
Americas Comparable Sales YoY	-2% (constant -1%)
International Comparable Sales YoY	+6% (constant +7%)
Digital Revenue	$961M (41% of total revenue)
Store Channel Sales Growth YoY	+8%
Ending Store Count	770
Net New Stores (Q1)	+3
Total Gross Square Feet	3,415k
Share Repurchases	1.4M shares; $430.4M cost ; CFO: 1.36M at $316 avg
Cash & Equivalents	$1.325B
Inventories	$1.652B (+23% YoY; units +16%)
Effective Tax Rate	30.2%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue	FY 2025	$11.15–$11.30B	$11.15–$11.30B	Maintained
Diluted EPS	FY 2025	$14.95–$15.15	$14.58–$14.78	Lowered
Gross Margin (YoY)	FY 2025	~-60 bps vs FY 2024 (prior guide)	~-110 bps vs FY 2024	Lowered
SG&A Rate (YoY)	FY 2025	~+50 bps deleverage (prior guide)	~+50 bps deleverage	Maintained
Operating Margin (YoY)	FY 2025	~-100 bps (prior guide)	~-160 bps	Lowered
Effective Tax Rate	FY 2025	~30%	~30%	Maintained
Net Revenue	Q2 2026	n/a	$2.535–$2.560B	New
Diluted EPS	Q2 2026	n/a	$2.85–$2.90	New
Regional Growth Outlook	FY 2025	n/a	North America low–mid single-digit; China Mainland +25–30%; Rest of World ~+20%	New color

Notes: Management assumes incremental tariffs of ~30% on China and ~10% on remaining sourcing countries; mitigation via vendor savings and targeted pricing, with greater impact in 2H .

Earnings Call Themes & Trends

Topic	Q-2 (Q3 2025)	Q-1 (Q4 2025)	Current (Q1 2026)	Trend
Tariffs/Macro	Limited focus; strong international momentum	Macro uncertainties noted; FY25 outlook set	Explicit 30%/10% incremental tariff assumptions; pricing and sourcing mitigations phased into 2H; Q2 margin headwinds	Rising headwind; mitigation ramping
U.S. Demand/Traffic	Americas comps -2%; aiming to accelerate U.S.	Americas comps flat; cautious outlook	U.S. store traffic remained soft; comps -2%; promotional market intensity anticipated	Persistent softness
Product Innovation	Broad franchise strength; newness pipeline	Newness and innovation drove beat	Align No Line, Daydrift, Be Calm, Glow Up showing strong early response; full rollout in fall	Strengthening newness
Brand Activation	Holiday setup; engagement focus	Power of Three ×2 reiterated	“Summer of Align” campaign; U.S. unaided awareness to 40%	Improving awareness
International Expansion	Strong growth; store adds incl. Mexico	International +38% in Q4; 767 stores	Entering Italy (company-op), Belgium & Czech (franchise); China stores ~154, target ~200+	Expanding footprint
Supply Chain	No major issues flagged	Normal operations	Dual sourcing, vendor costing discussions central to tariff mitigation	Leveraging efficiencies

Management Commentary

“We intend to leverage our strong financial position and competitive advantages to play offense, while we continue to invest in the growth opportunities in front of us.” — CEO Calvin McDonald .
“Given the uncertainties in the macro environment… we are maintaining our revenue guidance for the full year. We now expect gross margin to decrease ~110 bps and operating margin to decrease ~160 bps versus 2024, driven predominantly by increased tariffs.” — CFO Meghan Frank .
“Unaided brand awareness in the U.S. grew from the mid-30s in Q4 to 40% in Q1.” — CEO Calvin McDonald .
“We are planning to take strategic price increases on a small portion of our assortment… modest in nature, alongside sourcing efficiency actions, with more impact in the second half.” — CFO Meghan Frank .
“Align No Line… early results very encouraging… will roll to all stores by September.” — CEO Calvin McDonald .

Q&A Highlights

Tariff mitigation: Management will implement modest, targeted price increases and sourcing/vendor efficiencies; expects mitigation to be more impactful in 2H 2025 and into 2026 .
U.S. comps: Lower traffic persisted; conversion slightly down YoY; average dollars per transaction higher; promotional intensity monitored, with risk of a spike in the back half if macro headwinds continue .
Markdown outlook: Q1 markdowns down ~10 bps YoY; prudently modeling 10–20 bps higher markdowns for FY amid consumer confidence concerns, not yet observed materially in results .
Inventory: Dollar inventory up due to tariffs and FX (AUC higher), units up low double digits expected in Q2; composition viewed favorably with investments in newness .
China and International: Still strong double-digit growth; China comps impacted ~4 pts by Chinese New Year timing; store count ~154 with runway to ~200 and co-location strategy ahead .

Estimates Context

Relative to S&P Global consensus, Q1 2026 revenue was essentially in-line (+$1.11M, ≈+0.05%), while EPS was marginally below (-$0.003, ≈-0.1%); Q2 2026 actuals (reported later) were below revenue consensus but above EPS consensus, reflecting tariff and investment impacts on margins . Consensus values: Values retrieved from S&P Global*.
Implications: Minor estimate drift likely on margins (GM, OM) rather than top line for FY, with sell-side models incorporating higher tariff assumptions, modest pricing, and 2H mitigation phasing .

Financial Results Detail: Segment and KPIs

Segment/Channel (Q1 2026 YoY)	Metric	Value
Americas	Net Revenue Growth	+3% (constant +4%)
International	Net Revenue Growth	+19% (constant +20%)
Americas	Comparable Sales	-2% (constant -1%)
International	Comparable Sales	+6% (constant +7%)
Digital	Revenue	$961M (41% of total)
Stores	Sales Growth	+8%
Stores	Ending Count	770
Square Footage	Ending Total	3,415k
Cash & Equivalents	Balance	$1.325B
Inventory	Balance/Units	$1.652B (+23%); units +16%
Tax Rate	Effective	30.2%

Guidance and Margin Architecture Detail

Margin/Expense Line	Q2 2026 Guide vs Q2 2025	FY 2025 Guide vs FY 2024	Drivers
Gross Margin	~-200 bps YoY	~-110 bps YoY	Higher occupancy/depreciation, higher tariffs, modestly higher markdowns, FX
SG&A Rate	+170–190 bps YoY	~+50 bps YoY	Foundational investments, depreciation, store labor normalization, brand building
Operating Margin	~-380 bps YoY	~-160 bps YoY	Tariffs and investments; mitigation phasing in 2H
Tax Rate	~30%	~30%	Stable assumptions

Key Takeaways for Investors

International strength offsets U.S. softness: Expect continued double-digit growth in China and Rest of World to drive mix, while U.S. comps may lag until traffic improves and newness scales distribution in the fall .
Margin path is tariff-dependent: Near-term pressure (Q2) with mitigation actions back-half weighted; watch for evidence of vendor savings and price capture without harming elasticity in premium segments .
Newness as a growth lever: Align No Line and lifestyle introductions (Daydrift, Be Calm) have strong early traction; full-store rollout is a potential 2H catalyst for comps and AURs .
Inventories elevated but intentional: Higher AUC from tariffs/FX and unit growth to support innovation; monitor cadence of sell-through and markdowns given cautious U.S. consumer .
Capital allocation: Ongoing repurchases ($430M in Q1) signal balance sheet strength; reconcile press release vs CFO share count detail when modeling average price/weighted shares .
Estimates likely converge on lower margins vs prior: FY EPS guide reduced; model a conservative GM/OM trajectory with modest price increases and FX/tariff sensitivity; revenue guide maintained .
Near-term trading setup: Q2 margin pressure is known; focus on updates to tariff mitigation, U.S. traffic trends, and fall product activation to gauge inflection potential into holiday .

Values retrieved from S&P Global* for consensus estimates.

lululemon athletica inc. (LULU)·Q1 2026 Earnings Summary