lululemon athletica inc. LULU used its fiscal second-quarter 2026 earnings call to acknowledge traffic pressure, uneven product acceptance and weaker brand sentiment. Management responded by cutting its full-year outlook and tightening costs.
Results also diverged from expectations. Earnings of $2.06 per share beat the Zacks Consensus Estimate of $1.79 by 15.1%, while revenues of $2.41 billion missed the consensus mark of $2.46 billion by 2.1%.
LULU Cuts Outlook as Q3 Starts Slowly
Interim Co-CEO and CFO Meghan Frank said the third quarter began slowly. Management therefore built a more cautious view into its second-half forecast.
LULU expects third-quarter revenues of $2.29 billion to $2.32 billion, down 10% to 11%. Earnings are projected at 93 cents to 98 cents per share.
North America revenues are expected to decline in the mid-teens. For fiscal 2026, management cut revenue guidance to $10.35 billion to $10.50 billion and earnings guidance to $9.48 to $9.73 per share.
lululemon Sees Traffic and Product Friction
Frank said traffic is the biggest source of pressure in North America and China Mainland. Conversion is also down year over year, although it has not worsened further.
North America revenues declined 8% in Q2. China Mainland reported revenues rose 4% but fell 2% in constant currency amid brand sentiment issues, a softer Tmall 618 event and weaker product newness.
Product performance remained uneven. Frank said leggings sales fell approximately 20%, while accessories declined 13%, leaving newer silhouettes unable to fully offset weakness in core categories.
LULU Chases Winners and Trims Assortments
Management is leaning harder on faster replenishment where demand is strongest. Frank said the company is chasing approximately 20% more volume this year than last year.
Women’s away-from-body styles including Groove Wide-Leg, Align Foldover Jogger and the updated Dance Studio Pant are performing well. Define, Scuba, selected men’s golf tops and Metal Vent Tech tees were also cited as strengths.
Interim Co-CEO, president and chief commercial officer Andre Maestrini said store SKUs have been reduced 15% in North America. LULU is also testing localized assortments, new fixtures and activity-based merchandising.
lululemon Steps Up Brand Spending
Frank said increased marketing investment will continue in the back half despite softer sales. Spending is focused on brand building, community activations, creators, social content and product consideration.
Management cited strong engagement around the summer yoga series and SeaWheeze. Frank said those efforts have not yet changed the top-line trajectory, but the response supports continued investment.
In China, Maestrini said the priority is rebuilding brand consideration and organic traffic. The plan centers on store activations, a Tmall Super Brand Day and wellness events rather than broad promotional activity.
LULU Faces Cost and Store Scrutiny in Q&A
A Wells Fargo analyst asked whether the cost structure can adjust quickly enough if sales stay weak. Frank said LULU is taking a deeper look across the business while protecting product and brand investment.
Management is tightening travel, professional fees, store labor hours and headcount growth. It is also pursuing supply-chain, procurement and technology efficiencies while reducing its fiscal 2026 net new store target to approximately 35 from about 40.
A Morgan Stanley analyst asked about store rationalization and assortment changes. Frank said every real estate deal is being scrutinized, while Maestrini emphasized lower SKU density and more curated stores.
lululemon Enters Leadership Transition
Frank said incoming CEO Heidi O’Neill will join next week and review strategy and the current action plan. In the meantime, management is focused on execution, tighter expenses and faster reaction to demand.
The call’s tone remained cautious. Management emphasized restoring full-price sales, improving brand sentiment and sharpening product relevance, while its guidance assumes no benefit from a near-term business inflection.
LULU's Zacks Signals Stay Mixed
LULU currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Its Value Score of A, Growth Score of B and VGM Score of A are favorable, while its Momentum Score of C is less supportive.
The Style Scores framework places the strongest emphasis on A or B scores when paired with Zacks Rank #1 or #2 stocks. A Zacks Rank #3 can still be held, and the Rank can change as analyst estimates are revised after the newly reported results.
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