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lululemon athletica inc. (LULU)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 2026: EPS beat but revenue fell slightly short. Diluted EPS was $3.10 vs S&P Global consensus of $2.86*, while revenue was $2.53B vs $2.54B consensus*; gross margin contracted 110 bps YoY to 58.5% and operating margin fell 210 bps to 20.7% .
  • Guidance reset: FY25 revenue cut to $10.85–$11.00B (2–4% growth; 4–6% ex-53rd week) and EPS to $12.77–$12.97; Q3 revenue guided to $2.47–$2.50B and EPS to $2.18–$2.23, with GM guided down ~410 bps YoY on tariffs and de minimis removal .
  • U.S. softness and product mix drove shortfall; Americas comps -4% while International grew strongly (International revenue +22%; China +25%) . Inventory rose 21% YoY to $1.72B (units +13%) .
  • Stock-catalyst narrative: Guidance cut driven by higher tariffs/de minimis and U.S. demand/product fatigue in lounge/social; management announced a product reset, agility initiatives, and appointed a Chief AI & Technology Officer to accelerate product and personalization .

What Went Well and What Went Wrong

What Went Well

  • International strength and share gains in performance apparel: China Mainland revenue +25% (+24% constant-currency), Rest of World +19% (+15% cc); management cited market share gains in U.S. performance apparel per Circana data .
  • New product innovation resonated: early success with Align No-Front-Seam, Daydrift, BeCalm; digital revenue grew 9% and reached $1.0B (39% of total) .
  • Cost discipline and one-time SBC accrual reversal aided EPS: EPS of $3.10 included a $0.15 benefit from a stock-based comp accrual reversal; excluding this, EPS would still have been above Q2 guidance range .

What Went Wrong

  • U.S. demand/product fatigue: Americas comps -4% as lounge/social core franchises (Scuba, SoftStream, Dance Studio) became “stale”; casual ~40% of assortment; management cited longer product life cycles and insufficient agility to chase newness .
  • Margin pressure from tariffs/de minimis: Gross margin down 110 bps YoY to 58.5%; company flagged 220 bps FY tariff/de minimis gross margin headwind ($240M) despite mitigation efforts .
  • Inventory higher: Inventories +21% YoY to $1.72B (units +13%), reflecting tariffs/FX and seasonal clearance needs; markdowns ran 60 bps above internal plan in Q2 and are expected higher for the year .

Financial Results

Year-over-Year (Q2 2025 → Q2 2026)

MetricQ2 2025 (YoY base)Q2 2026YoY Change
Revenue ($USD Billions)$2.371 $2.525 +7%
Gross Margin %59.6% 58.5% -110 bps
Operating Margin %22.8% 20.7% -210 bps
Diluted EPS ($)$3.15 $3.10 -$0.05

Sequential Trend (oldest → newest)

MetricQ4 2025Q1 2026Q2 2026
Revenue ($USD Billions)$3.611 $2.371 $2.525
Gross Margin %60.4% 58.3% 58.5%
Operating Margin %28.9% 18.5% 20.7%
Diluted EPS ($)$6.14 $2.60 $3.10

Actual vs Consensus and Guidance

MetricQ2 2026 ActualQ2 2026 Consensus*StatusQ3 2026 Guidance (Company)Q3 2026 Consensus*
Revenue ($USD Billions)$2.525 $2.540*Slight miss$2.470–$2.500 $2.481*
Diluted EPS ($)$3.10 $2.86*Beat$2.18–$2.23 $2.24*

Values with asterisk (*) are retrieved from S&P Global (Capital IQ) consensus; “consensus” and “# of estimates” sourced from S&P Global.

Segment and Comps Detail (YoY, Q2 2026)

MetricYoY Change
Americas Revenue+1%
International Revenue+22% (+20% cc)
China Mainland Revenue+25% (+24% cc)
Rest of World Revenue+19% (+15% cc)
Total Comparable Sales+1%
Americas Comparable Sales-4% (-3% cc)
International Comparable Sales+15% (+13% cc)

KPIs (Q2 2026 unless noted)

KPIQ2 2026Prior/Context
Digital Revenue / Mix$1.0B; 39% of revenue Q1 2026: $0.961B; 41%
Stores (end of Q2)784 (+14 net in Q2) 770 end of Q1
Gross Square Feet3,511k 3,415k in Q1
Inventory$1.723B (+21% YoY; units +13%) Q1: $1.652B (+23% YoY)
Cash & Equivalents$1.156B $1.325B in Q1
Share Repurchase1.1M shares; $278.5M 1.36M; $430M in Q1
Membership~30M members —

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY 2025$11.15–$11.30B $10.85–$11.00B Lowered
Diluted EPS ($)FY 2025$14.58–$14.78 $12.77–$12.97 Lowered
Gross Margin (YoY)FY 2025~-110 bps vs 2024 ~-300 bps vs 2024 Lowered
SG&A (YoY deleverage)FY 2025~+50 bps ~+80–90 bps Higher deleverage
Operating Margin (YoY)FY 2025~-160 bps ~-390 bps Lowered
Effective Tax RateFY 2025~30% ~30% Maintained
Revenue ($B)Q3 2025—$2.47–$2.50 New
Diluted EPS ($)Q3 2025—$2.18–$2.23 New
Gross Margin (YoY)Q3 2025—~-410 bps New
Tariff/De Minimis ImpactFY 2025~-40 bps assumed prior ~-220 bps GM; ~$240M gross profit hit Worse

Earnings Call Themes & Trends

TopicQ4 2025 Mentions (press)Q1 2026Q2 2026 (current)Trend
AI/TechnologyFocus on growth plan; no AI-specific item Tech investment within Power of Three ×2 roadmap Appointed first Chief AI & Tech Officer; AI to accelerate product and personalization Increasing strategic emphasis
Supply Chain & AgilityStrong execution; DC projects ongoing Multi-year DC project; pursuing dual sourcing, vendor negotiations Faster “fast-track” design, vendor fabric pre-positioning to shorten lead times Execution acceleration
Tariffs/De MinimisNot a headline in Q4 pressAssumed +10%/30% tariff scenario; GM -110 bps for FY De minimis removal; FY GM -300 bps, ~220 bps from tariffs; ~$240M gross profit impact Material headwind escalates
Product PerformanceRecord innovation; strong Q4 Newness resonated (Align No Line, Daydrift, BeCalm) Performance apparel strong; casual franchises fatigue; reset underway Mixed; reset in casual
Regional TrendsAmericas flat comps in Q4; International strong U.S. +2% rev; China +22% cc Americas comps -4%; China +25% but seeing Tier 1 macro headwinds U.S. softer
Marketing/BrandGrassroots + brand activations; awareness rising Awareness 40% in U.S. Maintain marketing ~5% of sales; localized activations Stable
Inventory/MarkdownsInventories +9% at FY-end Markdown rate down 10 bps in Q1 Higher seasonal clearance; markdowns +60 bps vs plan in Q2; FY up modestly Slightly more promotional

Management Commentary

  • “We are disappointed with our U.S. business results and aspects of our product execution… we are continuing to take the necessary actions to strengthen our merchandise mix and accelerate our business.” — CEO Calvin McDonald .
  • “Our lounge and social product offerings have become stale… Scuba, SoftStream, and Dance Studio [franchises]… We intend to increase new styles as a % of our overall assortment from the current 23% to approximately 35% next spring.” — CEO .
  • “We exceeded expectations on EPS, but revenue fell short of our guidance driven predominantly by our U.S. business… revising our full year outlook… [amid] higher tariff rates.” — CFO Meghan Frank .
  • “The removal of the de minimis exemption… will have a significant impact on our gross margin and represents approximately 170 bps of the 220 bps tariff-related decline we now expect for the year.” — CFO .
  • “Ranju Das has joined as our new Chief AI and Technology Officer… to expedite our product innovation process, improve agility and speed to market, and increase personalization.” — CEO and appointment PR .

Q&A Highlights

  • Product mix and timeline: Casual/lifestyle is ~40% of assortment; two new lounge/social items (“LoungeFull” and “Big Cozy”) launching in back half; biggest newness impact expected in 2026 .
  • Pricing as mitigation: Modest, targeted U.S. price increases on a small subset; balanced with higher markdowns to clear seasonal goods; de minimis removal contributes ~170 bps of FY GM pressure .
  • Inventory and de minimis logistics: ~2/3 of U.S. e-commerce orders fulfilled through Canada previously benefited from de minimis; now reassessing DC network/inventory placement .
  • Demand cadence: May strongest, July weakest in Q2; traffic slowed through the quarter; Q3-to-date U.S. in line with annual guide, China at higher end (but Q4 China to the low end due to CNY shift) .
  • Digital vs stores: E-commerce grew 9% and outpaced stores; higher clearance tends to flow through online .

Estimates Context

  • Q2 2026 vs S&P Global consensus: Revenue $2.525B vs $2.540B* (slight miss), EPS $3.10 vs $2.86* (beat). 26 EPS and 24 revenue estimates contributed to consensus*.
  • Q3 2026 outlook vs consensus: Company guides revenue $2.47–$2.50B and EPS $2.18–$2.23 vs consensus $2.481B and $2.242*, implying in-line revenue and slightly below-consensus EPS at the midpoint*.
    Values marked with an asterisk (*) are retrieved from S&P Global (Capital IQ).

Key Takeaways for Investors

  • Near-term: Expect elevated gross margin pressure from tariffs/de minimis (FY ~-300 bps YoY; Q3 GM -410 bps), partially mitigated by pricing, vendor actions, and mix management .
  • U.S. comp recovery hinges on casual reset and agility: Watch adoption of new lounge/social styles and the increased newness penetration (23% → ~35% by spring) to gauge trajectory into 2026 .
  • International remains the growth engine: China +25% and Rest of World +19% in Q2; monitor signs of macro softness in Tier 1 China cities vs continued expansion and store productivity .
  • Digital strength provides buffer: Digital mix at 39% with conversion uptick; clearance leans online—watch markdown discipline vs inventory normalization in H2 .
  • EPS quality: Q2 EPS benefited ~$0.15 from SBC accrual reversal; underlying run-rate remains pressured by tariffs and higher SG&A deleverage .
  • Risk-reward pivot: Street likely to cut outer-period estimates given FY reset and Q3 EPS guide slightly below consensus*; upside optionality if product refresh and AI/tech-driven agility accelerate U.S. recovery in 2026 .
  • Execution watchlist: cadence of price increases (U.S.-only), inventory/unit growth vs sales, and tariff mitigation pacing (vendor savings, sourcing, DC footprint) .