Lululemon shares tumble on weak China, North America sales

Lululemon shares tumble on weak China, North America sales

Fri, September 4, 2026 at 5:04 PM GMT+3 2 min read

• LULU -17.64%

Lululemon Athletica Inc (NASDAQ:LULU) shares fell 17% in early Friday trading after the athletic apparel retailer reported weaker comparable sales and cut its full-year guidance.

Second-quarter revenue was $2.4 billion, down 4% year-over-year and below the $2.46 billion estimate, with comparable sales down 9%. EPS of $2.92 included a $0.86 tariff-refund benefit. Gross margin rose 200 basis points to 60.5%, boosted by $134.5 million in tariff refunds.

Operating income of $453.7 million beat estimates but fell 13% year-over-year, and operating margin contracted 190 basis points to 18.8%.

For fiscal 2026, Lululemon now guides revenue of $10.35 billion to $10.5 billion, versus an $11.04 billion estimate, and EPS of $9.48 to $9.73, versus $10.88 estimated. Third-quarter guidance of $2.29 billion to $2.32 billion in revenue and $0.93 to $0.98 in EPS also came in well below Street estimates.

Bank of America said the reset leaves no clear line of sight to an inflection point, citing a second-quarter miss in China and continued weakness in North America. The bank kept its Neutral rating, cut EPS estimates, and lowered its price objective to $122 from $140, while noting incoming CEO Heidi O'Neill, who starts next week, could signal a strategy shift on the next earnings call.

China Mainland comps fell 8%, well short of guidance, hurt by weak traffic tied to social media backlash over a Great Wall marketing event and a soft Tmall 618 event. North America comps dropped 12%, with leggings sales down 20% as shoppers shift toward away-from-body silhouettes.

Bank of America expects North American trends to worsen in the third quarter, partly because continued store openings and marketing spend will drive 1,050 basis points of margin decline, easing to about 240 basis points of pressure in the fourth quarter as tariff impacts lap. The bank noted $105 million in tariff refunds not yet reflected in guidance.