Lululemon Athletica Inc. reported first-quarter earnings that surpassed market expectations, but the company signaled ongoing challenges by lowering its full-year outlook. The Vancouver-based retailer posted net revenue of US$2.5 billion for the three months ending May 3, a four percent increase year over year, beating analysts' forecasts of US$2.4 billion.
Net income for the quarter was US$195 million, a decline from US$314 million in the same period last year. Diluted earnings per share came in at US$1.69, down from US$2.60 per share a year ago but slightly above the consensus estimate of US$1.67 per share.
Guidance Downgrade
Lululemon downgraded its guidance for fiscal 2026, now expecting net revenue to decline between zero and one percent, landing between US$11 billion and US$11.15 billion. Previously, the company had forecasted full-year net revenue growth of two to four percent, in the range of US$11.35 billion to US$11.5 billion.
“Our work to drive improvements in North America resulted in some positive signals in the quarter, including a sequential improvement in full-price sales,” said Meghan Frank, Lululemon’s interim co-chief executive and chief financial officer, in a statement. “More recently, we have been navigating headwinds that have led us to adjust our outlook for the full year.”
Regional Performance
Net revenue in the Americas declined three percent in the first quarter to US$1.6 billion. In North America, where Lululemon generates the majority of its sales, net revenue fell three percent in Canada and four percent in the United States. However, mainland China emerged as a bright spot, with net revenue surging 30 percent to US$478 million, accounting for 19 percent of total sales and serving as a key growth driver. Net revenue in the rest of the world increased 13 percent to US$372 million.
Comparable sales, a crucial metric that includes online sales and revenue from stores open for at least 12 months, rose one percent.
Challenges Ahead
Lululemon’s share price has dropped approximately 60 percent over the past year, weighed down by several factors including U.S. tariffs, the end of the de minimis duty-free shipping loophole, the departure of former CEO Calvin McDonald, and slowing sales in North America. Additionally, product missteps and intensifying competition in the athleisure market have compounded the company’s struggles.
For the second quarter, Lululemon anticipates net revenue to decline by three percent to two percent, ranging from US$2.45 billion to US$2.475 billion.
The second quarter also marks the conclusion of a proxy fight with founder Chip Wilson, who has criticized the brand’s management, strategic direction, and lack of product innovation for a decade after leaving the company. Wilson launched a public campaign in late December to reshape the board of directors.
