Lululemon‘s troubles are far from over.
The athletic apparel retailer lowered its full-year guidance and issued a weak current quarter outlook on Thursday as interim CEO Meghan Frank pointed to undisclosed “headwinds.”
“We have been navigating headwinds that have led us to adjust our outlook for the full year,” Frank said in a news release. “We have assessed the business and are taking additional actions to reposition where needed and further strengthen our product engine. We remain confident in our path forward.”
The company’s shares dropped nearly 10% in extended trading following the report. Lululemon’s stock has plunged about 40% this year as of Thursday’s close.
Lululemon is now expecting fiscal 2026 sales to be between $11 billion and $11.15 billion, down from a previous range of between $11.35 billion and $11.50 billion. Analysts were expecting full-year sales of $11.48 billion, according to LSEG.
Lululemon also cut its earnings guidance by more than $1 per share. It’s now expecting earnings per share to be between $10.95 and $11.15 for the year, down from a previous range of $12.10 to $12.30. Analysts were expecting $12.30 per share, according to LSEG.
The current quarter doesn’t look much better. Lululemon is expecting sales to be between $2.45 billion and $2.48 billion, below expectations of $2.60 billion, according to LSEG. It’s expecting earnings per share to be between $1.76 and $1.81, well below expectations of $2.68, according to LSEG.
While Lululemon’s guidance failed to meet forecasts, it did beat expectations on the top and bottom lines during its fiscal first quarter, albeit on expectations that have come down significantly since the retailer last reported earnings. Here’s how the company performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
Earnings per share: $1.69 vs. $1.68 expected Revenue: $2.47 billion vs. $2.43 billion expected
The company’s reported net income for the three-month period that ended May 3 was $195.0 million, or $1.69 per share, compared with $314.6 million, or $2.60 per share, a year earlier.
Sales rose to $2.47 billion, up about 4% from $2.37 billion a year earlier. Comparable sales grew 1%, better than expectations of 0.4%, according to LSEG.
Lululemon’s woes have been centered on the Americas, its largest and most important region. During the quarter, comparable sales fell 5% in the market, marking the fifth straight quarter of declines. Lululemon’s overall business is still growing, but it has primarily seen that expansion in China and in other international regions, which make up a fraction of overall revenue.
Sales have been a sore spot for Lululemon, but profitability has been an even larger challenge. The company was a large beneficiary of the now defunct de minimis exemption, which allowed it to ship packages duty free across the Canadian border into the U.S., and has also been hit hard by tariffs.
With fewer people coming to its stores and website to buy workout clothes, the company has also leaned more on discounting to drive sales, which has hurt its bottom line and its reputation as a premium brand. In her statement, Frank said full-prices sales improved in North America from the prior quarter, calling it a “positive” signal for the business.
It’s also spent the last six months in a dramatic proxy contest with its founder, which was costly and took management’s attention away from its turnaround.
In addition to all of those struggles, Lululemon, like everyone else, has also had to contend with a new conflict in the Middle East and surging gas prices, which are also increasing costs.
In the three months since Lululemon last reported earnings, its made some progress on addressing some of its challenges. It hired longtime Nike veteran Heidi O’Neill to be its next CEO and settled its proxy battle with its founder. Investors are likely to be relieved Lululemon’s management team no longer has to put its focus and cash behind the proxy contest, but some are still feeling sour over O’Neill’s appointment, particularly because she won’t be able to start until September.
Under the direction of two interim CEOs, CFO Frank and Chief Commercial Officer André Maestrini, Lululemon has been working to rebuild its product assortment and address its domestic growth challenge. But the real strategy changes won’t come until O’Neill starts.
Given how long it takes for Lululemon to get from product idea to market, there’s concern that it’ll take even longer than expected to fix the challenges that have been weighing on its business.
Still, Lululemon has contended that O’Neill is the right person for the job. While at Nike, O’Neill established and built Nike’s women’s business and grew it into a multibillion-dollar franchise. She also worked to reduce product lead times – experience that will serve her as Lululemon’s chief executive.
