North America Weakness Forces Lululemon Outlook Cut as Shares Slide

Lululemon Faces Growing Pressure in Core Markets

Lululemon Athletica (LULU) reported first-quarter results that slightly topped Wall Street expectations, but weaker guidance for the second quarter and full year overshadowed the earnings beat.

The athleisure retailer cited slowing North America demand, weaker product performance, and negative social media commentary as key reasons behind the reduced outlook. Shares fell more than 10% in premarket trading following the report.

Key Points

• Lululemon cut its fiscal 2026 revenue outlook to $11 billion-$11.15 billion, below prior guidance and analyst expectations.
• North America comparable sales fell 5%, extending the region’s ongoing slowdown despite strong international growth.
• Shares dropped more than 10% after the company projected weaker second-quarter revenue, earnings, and margins.

Why Did Lululemon Lower Guidance?

Lululemon said recent business trends deteriorated due to weaker consumer response to product launches and rising negative brand commentary across social media and press coverage.

The company now expects fiscal 2026 revenue between $11 billion and $11.15 billion, compared with prior guidance of $11.35 billion to $11.50 billion. The revised outlook implies flat to slightly negative annual growth.

Adjusted earnings per share guidance was also lowered to a range of $10.95 to $11.15, down from prior expectations of $12.10 to $12.30.

Interim co-CEO and CFO Meghan Frank said the company has been navigating “headwinds” tied to product performance and broader brand perception issues. She added that Lululemon is taking actions to strengthen its product engine and reposition parts of the business.

What Happened in the First Quarter?

For the quarter ended May 3, Lululemon reported revenue of roughly $2.5 billion, up 4% year over year and slightly ahead of analyst expectations.

Adjusted earnings per share came in at $1.69, modestly above consensus estimates but sharply below the $2.60 reported in the same period last year.

The results showed a widening divide between international growth and weakness in the Americas.

Revenue in China increased 30%, while international sales overall rose 22%. However, U.S. revenue fell 4%, Canada declined 3%, and comparable sales in the Americas dropped 5%.

Gross margin declined 410 basis points to 54.2%, pressured by tariffs, higher markdown activity, and increased investment costs.

Operating income fell 37% year over year, while operating margin declined to 11.2%.

What Challenges Does the New CEO Inherit?

Incoming CEO Heidi O’Neill, a longtime Nike (NKE) executive, is set to take over leadership in September during a difficult transition period for the company.

Lululemon continues to face slowing demand in North America, increased competition, and ongoing concerns around brand momentum. The company also dealt with a governance dispute involving founder Chip Wilson, who publicly criticized management and strategy before recently reaching a cooperation agreement with the company.

Analysts noted that the turnaround process may remain in a holding pattern until O’Neill formally takes over.

BTIG downgraded the stock to Neutral, saying visibility into future growth remains limited and warning that North America trends could deteriorate further before stabilizing.

What It Means for Investors

The market reaction reflected concerns that Lululemon’s slowdown may be more structural than temporary.

While international growth remains strong, North America still represents the company’s largest market, and comparable sales declines continue to pressure investor sentiment.

The weaker guidance also highlighted growing margin pressure from tariffs, markdowns, and higher marketing spending. Investors are now watching whether new leadership can restore product momentum and improve brand engagement in core markets.

Despite the stock’s sharp decline over the past year, uncertainty around sales stabilization and profitability remains elevated.

Conclusion

Lululemon delivered a modest first-quarter earnings beat, but weaker guidance and deteriorating North America trends dominated investor attention.

The company lowered its full-year revenue and earnings outlook as slowing sales, margin pressure, and product challenges weighed on performance. With a leadership transition underway and visibility into recovery still limited, investors appear focused on whether Lululemon can stabilize its core business before growth resumes.

FAQs

Why did Lululemon stock fall?

Lululemon shares fell after the company lowered its full-year revenue and earnings outlook and projected weaker second-quarter results than analysts expected.

What is Lululemon’s new 2026 revenue guidance?

The company now expects fiscal 2026 revenue between $11 billion and $11.15 billion, down from prior guidance of $11.35 billion to $11.50 billion.

How did Lululemon perform in North America?

Comparable sales in the Americas declined 5%, while U.S. revenue fell 4% and Canada revenue declined 3%.

What helped Lululemon’s international growth?

China revenue increased 30% during the quarter, supported by promotions and stronger international demand.

When will Heidi O’Neill become CEO of Lululemon?

Former Nike executive Heidi O’Neill is scheduled to become CEO on Sept. 8, 2026.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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