Lululemon updates full-year outlook following domestic slowdown

Canadian athletic apparel brand Lululemon Athletica Inc. (Lululemon) reported its financial results for the first quarter of fiscal year 2026, ended June 4, 2026, revealing steady international growth alongside deceleration in its domestic market. As detailed in the official press release, total net revenue for the period reached 2.47 billion dollars, representing a 4 percent increase compared to 2.37 billion dollars in the first quarter of fiscal year 2025. On a constant dollar basis, net revenue increased by 2 percent.

The company experienced varying performance across geographic regions. In the Americas, net revenue decreased by 3 percent, or 4 percent on a constant dollar basis. Conversely, international net revenue grew by 22 percent, driven by a 16 percent increase on a constant dollar basis, highlighting robust demand in overseas markets.

Comparable sales and margin contractions

Total comparable sales, which encompass company-operated retail locations and e-commerce, rose by 1 percent during the quarter, though they declined by 2 percent on a constant dollar basis.

Domestic retail channels remained constrained, with comparable sales in the Americas declining by 5 percent, or 6 percent on a constant dollar basis. International comparable sales cushioned this performance, increasing by 13 percent, or 8 percent on a constant dollar basis. Within the international segment, Mainland China delivered a 20 percent increase in comparable sales.

Gross profit decreased by 3 percent to 1.34 billion dollars from 1.38 billion dollars in the prior year period. Consequently, gross margin contracted by 410 basis points to 54.2 percent. Net income stood at 195.05 million dollars, representing diluted earnings per share (EPS) of 1.69 dollars. This performance marked a decrease from a net income of 314.57 million dollars, or 2.60 dollars per diluted share, in the same period last year.

Product updates and strategic agility

The financial update coincides with organizational adjustments following leadership shifts. Lululemon interim co-chief executive officer and chief financial officer, Meghan Frank, noted that while the team executed with speed, the business is currently navigating headwinds that have prompted revisions to the full-year outlook. Frank stated during the investor call that spikes of negative media and social commentary regarding product compositions and proxy contests impacted traffic, predominantly in China and the US.

Furthermore, Frank acknowledged that certain product launches failed to meet expectations. To address these trends, the brand is accelerating its chase capabilities by 20 percent relative to last year to read and react faster to consumer demands, with product focus shifting toward outerwear and lounge fabrics.

Interim co-CEO, president, and chief commercial officer, André Maestrini, reiterated that teams remain focused on core priorities to reignite growth, specifically building upon successful product capsules across train, tennis, and run.

Inventory control and store network development

Lululemon ended the first quarter of 2026 with 1.51 billion dollars in cash and cash equivalents, and maintained 593.60 million dollars of available capacity under its revolving credit facility.

Total inventories at quarter-end grew by 2 percent to 1.69 billion dollars compared to the first quarter of 2025. However, on a unit basis, inventories decreased by 4 percent, indicating healthier stock management and reduced volume risk. During the period, the company allocated 358.30 million dollars to repurchase 2.20 million of its own shares.

The activewear retailer continued to grow its physical footprint, opening five net new company-operated locations during the quarter to bring its global store count to 816 locations.

Updated financial outlook

For the second quarter of fiscal year 2026, Lululemon projects net revenue to range between 2.45 billion dollars and 2.48 billion dollars, representing a decline of 2 percent to 3 percent. Diluted EPS is anticipated to fall between 1.76 dollars and 1.81 dollars.

For the full fiscal year 2026, the company lowered its guidance. It now estimates net revenue to land between 11.00 billion dollars and 11.15 billion dollars, translating to a flat to 1 percent decline compared to fiscal year 2025. Full-year diluted EPS is projected to be between 10.95 dollars and 11.15 dollars.