NEW YORK / RankWire.AI / – Lululemon Athletica Inc. reported a 4% decrease in net revenue for its fiscal second quarter of 2026, amounting to $2.42 billion, which fell short of the consensus estimate of $2.46 billion. Despite this, the company’s headline diluted earnings per share of $2.92 exceeded market expectations, primarily due to an unexpected regulatory benefit. A tariff refund of $134.5 million under the International Emergency Economic Powers Act, along with interest, contributed an additional $0.86 per share, masking some underlying pressures on operating margins.
The reported earnings per share were boosted by $134.5 million in tariff refunds under the International Emergency Economic Powers Act, plus $4.1 million in related interest, collectively adding $0.86 per share to net income. After removing the impact of this tariff relief, operating margins showed signs of contraction as selling, general, and administrative expenses grew to 41.7% of net revenue. Revenue in the Americas region declined 8% year-over-year, accompanied by a 12% decrease in comparable sales, reflecting ongoing challenges in core products and store traffic.
In light of persistent demand softness in key markets, management has significantly revised its full-year fiscal 2026 outlook. Lululemon Athletica Inc. now anticipates full-year net revenue between $10.35 billion and $10.50 billion, representing a decline of 5% to 7% compared to the previous year. The projected full-year diluted earnings per share are between $9.48 and $9.73, sharply lower than the $13.26 recorded in fiscal 2025. Following this update, the company’s shares declined nearly 18% during extended after-hours trading.
Net Revenue Dips 4% to $2.42 Billion
International markets helped partly offset domestic declines, with total international net revenue increasing 4% on a reported basis and 2% in constant currency. Nonetheless, comparable sales in mainland China fell 8% as regional retail traffic slowed. Overall quarterly operating income declined 13% to $453.7 million, reducing operating margins to 18.8% from 20.7% a year earlier, despite gross margin expansion driven by the tariff credits.
During the earnings call, as reported by market analysts, interim co-Chief Executive Officer and Chief Financial Officer Meghan Frank observed that brand momentum faced headwinds from softer consumer responses to new product launches and a broad decline in traffic across both physical stores and digital channels. In response, management lowered its net new store opening target for the year to approximately 35 locations and adjusted inventory strategies to prioritize top-performing product categories.
Overseas Expansion Drives 4% Growth in International Markets
At the end of the second quarter, the retailer held $1.4 billion in cash and cash equivalents and had total inventory of $1.7 billion, representing a 1% decrease in dollar value and a 7% reduction in units compared to the same period last year. During this quarter, $330 million was allocated to repurchasing 2.7 million common shares under existing buyback programs. The company intends to continue executing its share repurchase program while maintaining capital expenditure plans between $680 million and $700 million for the full fiscal year.
For the third quarter of fiscal 2026, Lululemon projects net revenue will be between $2.29 billion and $2.32 billion, reflecting a decline of 10% to 11% year-over-year. The forecast for third-quarter diluted earnings per share is between $0.93 and $0.98, compared to $2.59 in the same period last year. Investors and analysts will be closely watching the company’s execution and product adjustments as the holiday shopping season approaches.