Lululemon lowers 2026 forecast as North America sales weaken
The athletic apparel company cut its annual outlook after weak U.S. trends, softer product launches and margin pressure from tariffs and discounts.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
Lululemon cut its fiscal 2026 forecast Thursday, pointing to weaker demand in North America, product launches that drew less shopper interest than expected and brand pressure tied to recent public criticism. CNBC reported that the lowered outlook came even though the athletic apparel retailer slightly topped Wall Street estimates for its fiscal first quarter.
Interim CEO Meghan Frank told analysts on the company’s earnings call that Lululemon saw bursts of “negative commentary in the media and on social channels” that hurt store and website traffic, according to CNBC. Frank also said some recent launches did not produce the response the company had expected from customers.
Asked about the commentary, Frank cited the company’s proxy fight with founder Chip Wilson and questions about the makeup of some products, CNBC reported. She said those stories had eased, but Lululemon had not yet returned to the sales patterns it saw before the disruption.
Guidance comes down
Lululemon now expects fiscal 2026 revenue of $11 billion to $11.15 billion, down from its prior forecast of $11.35 billion to $11.50 billion, according to CNBC. Analysts surveyed by LSEG had expected $11.48 billion.
The company also reduced its full-year earnings outlook to $10.95 to $11.15 per share, compared with its previous range of $12.10 to $12.30, CNBC reported. LSEG said analysts had been looking for $12.30 per share.
For the current quarter, Lululemon forecast revenue of $2.45 billion to $2.48 billion and earnings of $1.76 to $1.81 per share, according to CNBC. LSEG said analysts expected $2.60 billion in revenue and $2.68 in earnings per share.
Lululemon shares fell 11% in after-hours trading following the report, CNBC reported. The stock had already dropped about 40% for the year as of Thursday’s close.
First-quarter results beat lowered expectations
For the quarter ended May 3, Lululemon reported earnings of $1.69 per share on revenue of $2.47 billion, according to CNBC. LSEG said analysts had expected earnings of $1.68 per share and revenue of $2.43 billion.
Net income fell to $195 million from $314.6 million a year earlier, CNBC reported. Revenue rose about 4% from $2.37 billion, while comparable sales increased 1%, ahead of the 0.4% gain expected by analysts surveyed by LSEG.
The company’s weakness remained concentrated in the Americas, its largest region, according to CNBC. Comparable sales there fell 5% in the quarter, marking the fifth consecutive quarterly decline, while international revenue rose 22% and international comparable sales increased 13%.
Lululemon expects North America sales to keep falling, CNBC reported. The company forecast a low-double-digit percentage decline in the current quarter and a high-single-digit percentage drop for the full year, while it expects China sales to rise by a mid-to-high-teens percentage in the current quarter and about 20% for the year.
Tariffs and markdowns pressure margins
Gross margin fell 4.1 percentage points to 54.2% in the first quarter, below the 54.6% expected by analysts tracked by StreetAccount, CNBC reported. The company said tariffs accounted for 2.8 percentage points of the decline and markdowns added 0.4 percentage points of pressure.
CNBC reported that Lululemon has been hurt by the end of the de minimis exemption that had allowed some duty-free shipments into the U.S. from Canada, as well as by broader tariff costs. The company has also used more discounts to support sales, which has weighed on profitability and on its premium positioning, according to CNBC.
Frank said slower sales expectations in the second quarter would require more seasonal clearance, CNBC reported. For the full year, Lululemon expects gross margin to decline 0.9 percentage points and expects to offset nearly all of the tariff effect.
Lululemon has named former Nike executive Heidi O’Neill as its next CEO and has settled its proxy contest with Wilson, CNBC reported. O’Neill is expected to start in September, while interim co-CEOs Frank and André Maestrini continue work on the product lineup and domestic growth issues.
This story draws on original reporting from CNBC.