Lululemon Athletica Inc. (NASDAQ:LULU) stock plunged in premarket trading Friday after the athletic apparel retailer reported mixed first-quarter results, issued second-quarter guidance well below Wall Street expectations, and lowered its full-year outlook.
Revenue Tops Estimates, Earnings Miss
Lululemon reported first-quarter revenue of $2.47 billion, up 4% from a year earlier and ahead of analysts’ estimates of $2.43 billion. On a constant-currency basis, revenue increased 2%.
Adjusted earnings came in at $1.69 per share, narrowly missing consensus estimates of $1.70 per share.
Comparable sales increased 1% year over year. On a constant-currency basis, comparable sales declined 2%.
Gross margin fell 410 basis points to 54.2%, primarily due to tariff-related costs, higher markdowns, and fixed-cost deleveraging.
Operating margin declined to 11.2% from 18.5% a year earlier as profitability came under pressure from rising costs and higher operating expenses.
Inventory totaled $1.7 billion at quarter-end, up 2% in dollar terms but down 4% in units. The company ended the quarter with $1.5 billion in cash and cash equivalents.
North America Weakness Weighs on Results
Americas revenue declined 3% from a year earlier, or 4% on a constant-currency basis.
By contrast, Mainland China revenue jumped 30%, or 23% on a constant-currency basis. Mainland China comparable sales increased 20%, or 13% on a constant-currency basis. Growth benefited by approximately 8 percentage points from the timing of the Chinese New Year holiday.
Revenue in the Rest of World segment rose 13%, or 9% on a constant-currency basis.
Total international revenue increased 22%, or 16% on a constant-currency basis.
Lululemon ended the quarter with 816 stores worldwide after opening five net new locations. Total square footage increased 11% year over year.
Guidance Cut
Management said recent sales weakness was partly driven by a wave of negative media coverage and social media commentary that hurt customer traffic and demand.
Executives said the brand-related backlash, along with weaker-than-expected performance from some product launches, contributed to softer sales trends entering the second quarter and was reflected in the company’s reduced guidance.
For the second quarter, Lululemon expects revenue of $2.45 billion to $2.48 billion, below analyst estimates of $2.60 billion. The company forecasts earnings of $1.76 to $1.81 per share, compared with consensus estimates of $2.71 per share.
Management expects gross margin to decline about 410 basis points year over year in the quarter, largely due to tariff costs and ongoing investments.
Lululemon lowered its fiscal 2026 revenue outlook to a range of $11 billion to $11.15 billion from prior guidance of $11.35 billion to $11.5 billion. The revised forecast compares with analyst expectations of $11.46 billion.
The company also cut its full-year earnings outlook to $10.95 to $11.15 per share from prior guidance of $12.10 to $12.30 per share. Analysts were expecting earnings of $12.31 per share.
Management said it expects softness in North America to persist in the near term, while China remains its strongest growth market with an expected growth rate of about 20%.
LULU Price Action: Lululemon Athletica shares were down 11.14% at $111.00 during premarket trading on Friday. The stock is trading at a new 52-week low, according to Benzinga Pro data.
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