Live: Is Lululemon (LULU) Set to Rise Following Its Earnings Report?
Key Points
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EPS expected to decline YoY as tariffs and SG&A deleverage weigh on Q2 margins
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China remains a growth engine with 25–30% sales expansion targeted for FY26
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New product launches (Align No Line, Glow Up, Daydrift) gaining traction, driving mix shift
Live Updates
My scorecard
The U.S. slowdown is now the core story, outweighing China and international momentum. Guidance cuts reinforce that near-term growth and margins are both under pressure.
Analyst Estimate Reset Table (Consensus vs. New Company Guide):
| Metric | Prior Street | New Company Guide | Δ |
|---|---|---|---|
| FY25 Revenue | $11.20B | $10.85–11.00B | ▼ |
| FY25 EPS | $14.61 | $12.77–12.97 | ▼ |
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Sentiment Signals:
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Bearish: Guidance cut, Americas comps –4%, inventories +21%.
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Neutral: EPS beat on discipline.
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Bullish: China +25% revenue, International +22%.
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What Changed This Quarter
- Revenue missed internal guidance, driven by U.S. weakness.
- Guidance slashed — first meaningful cut in several years.
- Inventory build raises concerns about markdown risk heading into H2.
- EPS beat was mostly tax and cost control, not sales strength.
Key Operating Highlights
- Revenue +7% YoY to $2.5B, but Americas only +1% vs. International +22%.
- Comparable sales +1%: Americas –4% vs. International +15%.
- Gross margin down 110bps to 58.5%, pressured by tariffs.
- Inventories up 21% YoY to $1.7B — a red flag amid weak U.S. demand.
- Added 14 net new stores, ending with 784 globally.
Guidance Update
| Period | New Guidance | Prior Guidance | Street Consensus | Direction |
|---|---|---|---|---|
| Q3 Rev | $2.47–2.50B | N/A | $2.56B | ❌ Below |
| Q3 EPS | $2.18–2.23 | N/A | $2.95 | ❌ Below |
| FY25 Rev | $10.85–11.00B | $11.20B | $11.20B | 📉 Lowered |
| FY25 EPS | $12.77–12.97 | $14.61 | $14.61 | 📉 Lowered |
Both revenue and EPS outlooks were cut materially, with tariffs cited as a ~$240M gross profit drag.
Management Commentary
CEO Calvin McDonald: “We are disappointed with our U.S. business results and aspects of our product execution… We are continuing to take the necessary actions to strengthen our merchandise mix and accelerate our business.
LULU is admitting execution issues on its home turf, signaling this is not just macro but also internal missteps.
LULU down big
| Metric | Actual | Estimate | Beat/Miss |
|---|---|---|---|
| Revenue | $2.53B | $2.54B | ❌ Miss |
| EPS | $3.10 | $2.85 | ✅ Beat |
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Stock down ~12% AH as a clean EPS beat is overshadowed by weak U.S. comps, margin pressure, and a cut to full-year guidance.
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Investors are reacting more to the soft Americas performance and tariff headwinds than the bottom-line upside.
How LULU Performed After Recent Earnings
| Quarter | EPS Surprise | 1-Day Move | 7-Day Move | 14-Day Move |
|---|---|---|---|---|
| Q1 2026 | 0.00% | +6.13% | +2.63% | +6.64% |
| Q4 2025 | +4.60% | −15.80% | −19.69% | −25.79% |
| Q3 2025 | +5.51% | −3.64% | −12.44% | −14.49% |
| Q2 2025 | +7.14% | +4.86% | +11.33% | +9.21% |
Average 7-day move (last 4): −4.46%
Lululemon (Nasdaq: LULU | LULU Price Prediction) enters Q2 earnings facing a delicate balance: new product innovation is resonating, but the U.S. consumer remains cautious, traffic is soft, and tariffs are pressuring gross margins. Last quarter (Q1 FY26), revenue grew 7% to $2.4B, but EPS was flat at $2.60. Management reaffirmed full-year revenue guidance, yet trimmed operating margin outlook due to incremental tariff drag.
Estimates Snapshot (Wall Street consensus)
- Current Qtr (Q2 FY26, Jul 2025): Revenue $2.54B, EPS $2.85
- Next Qtr (Q3 FY26, Oct 2025): Revenue $2.56B, EPS $2.95
- FY2026: Revenue $11.20B, EPS $14.61
- FY2027: Revenue $11.92B, EPS $15.81
Key Areas to Watch
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Tariff mitigation and pricing — LULU faces ~110 bps gross margin compression in FY26, largely from tariffs. Management plans modest price hikes and sourcing shifts, with relief expected in H2.
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U.S. consumer softness — Traffic was down in Q1; comps rose just 1%. Management admits consumers are “cautious and intentional” in spending. Investors will watch for any rebound in Q2.
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China growth — Mainland China revenue rose 21% in Q1; guidance calls for 25–30% FY26 growth. The region remains LULU’s most profitable market, with expansion to ~200 stores by year-end.
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Product innovation & newness — Early hits like Align No Line leggings and Glow Up leggings sold out, while lifestyle launches Daydrift and BeCalm trouser show potential to become new cores. Management is chasing inventory for H2 rollout.
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Inventory and markdowns — Units rose 16% YoY in Q1; LULU is layering in 10–20 bps more markdowns for H2 as a precaution against U.S. traffic and promotional activity.
Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
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