Lululemon's stock saw a 20% decline following disappointing Q2 and full-year profit forecasts, which failed to meet market expectations
Key Takeaways:
Lululemon experienced a significant drop in its shares on Friday due to underwhelming profit forecasts.
The company projected second-quarter sales and earnings below market expectations and revised its full-year profit outlook downward.
According to the CEO, customers are showing cautious spending behavior, while the CFO mentioned plans to increase prices on select products as a strategy to offset the effects of tariffs.
Lululemon Stock
Shares of Lululemon Athletica (LULU) dropped by 20% on Friday following the release of a second-quarter outlook that fell short of estimates. Additionally, the company revised its full-year profit forecast downward.
For the second quarter, Lululemon anticipates revenue between $2.54 billion and $2.56 billion, with earnings per share ranging from $2.85 to $2.90. These figures fall below the analyst consensus compiled by Visible Alpha, which projected revenue of $2.57 billion and earnings per share of $3.28.
While the athletic apparel company maintains its full-year sales forecast at $11.15 billion to $11.30 billion, it has reduced its expected earnings per share to between $14.58 and $14.78, down from its earlier projection of $14.95 to $15.15. In response to this adjustment, JPMorgan and UBS analysts cut their price targets for Lululemon's stock to $303 and $290, respectively, from previous targets of $389 and $330.
Lululemon's stock saw a decline
What’s happening:
Shares of Lululemon Athletica dipped slightly during extended trading on Tuesday following the release of its fourth-quarter results.
The company exceeded expectations, posting stronger-than-anticipated sales and earnings for the quarter.
What happened:
However, Lululemon provided a subdued revenue and profit outlook for 2026 and announced the appointment of a former Levi Strauss CEO to its board of directors.
How were the results:
The Vancouver, Canada-based company posted a modest increase in sales for the fourth quarter.
Its revenue climbed to $3.64 billion, up from $3.61 billion during the same period last year, surpassing consensus projections of $3.59 billion. Meanwhile, GAAP earnings reached $5.01 per share, exceeding analysts' expectations of $4.79 per share.
Lululemon's stock drops despite strong Q4 earnings performance
Why it matters:
Lululemon has been facing challenges amid weak consumer spending and fierce competition from industry heavyweights like Nike and Alo Yoga.
The company is currently in search of a permanent CEO following Calvin McDonald's departure in January. It also finds itself entangled in a proxy battle initiated by its founder, Chip Wilson. In an effort to bolster its governance, Lululemon appointed former Levi Strauss CEO Chip Bergh to its board. Meanwhile, Wilson has proposed three independent directors and is pushing for board elections.
As the company kicks off its new fiscal year, CFO Meghan Frank emphasized their commitment to executing an action plan, introducing innovative and distinct products, and enhancing customer experiences with the brand.
However, Lululemon's guidance for fiscal 2026 fell short of market expectations. The company forecasted GAAP earnings of $12.10–$12.30 per share, trailing estimates of $12.67 per share. Revenue projections were also slightly behind, estimated at $11.35–$11.50 billion versus market expectations of $11.53 billion.
Additionally, Lululemon highlighted the impact of its reliance on China for production. The company's recent outlook accounts for approximately $380 million in U.S. import tariffs, a sharp increase from $275 million the prior year.
LULU Stock Price and Chart Analysis
How shares responded:
Lululemon's shares dropped by 1.7%, closing at $156.52 in after-hours trading after the company released its quarterly results on Tuesday. The stock has declined over 24% so far this year.
What to watch:
Looking ahead, investors are expected to monitor overall consumer spending trends and increasing competition from rivals, both of which are likely to play a crucial role in shaping the company's future performance.