We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
LULU Q1 EPS of $1.69 beat estimates of $1.67; revenues of $2.47B beat estimates of $2.43B.
LULU international revenues rose 22% y/y, while Americas revenues fell 3% and comps dropped 5%.
LULU cut its FY26 outlook to $11-$11.15B revenues and $10.95-$11.15 EPS as margin pressure builds.
lululemon athletica inc. (LULU - Free Report) delivered first-quarter fiscal 2026 results, wherein revenues and earnings per share (EPS) surpassed the Zacks Consensus Estimate. The company delivered year-over-year top-line growth, supported by strength in its international business. However, the bottom line declined from the prior year, reflecting margin pressure from higher markdowns, tariff-related costs and elevated SG&A expenses.
lululemon’s fiscal first-quarter EPS of $1.69 declined 35% year over year but surpassed the Zacks Consensus Estimate of $1.67 by 1.2%.
The Vancouver, Canada-based company’s quarterly revenues increased 4% from the year-ago period to $2.47 billion and 2% on a constant-dollar basis. Revenues beat the Zacks Consensus Estimate of $2.43 billion by 1.6%. The quarter’s top-line growth was driven by strong international demand, even as comparable sales (comps) declined 2% on a constant-dollar basis and North America remained under pressure.
Total comps rose 1% year over year and declined 2% on a constant-dollar basis. Comps in the Americas dipped 5% on a reported basis and 6% on a constant-dollar basis. Internationally, comps increased 13% on a reported basis and 18% on a constant-dollar basis. Our model predicted comps growth of 0.3% for the fiscal first quarter.
Shares of the company declined 11.5% in the after-hours trading session on June 4, 2026, following the soft earnings performance in first-quarter fiscal 2026 and a bleak guidance. The Zacks Rank #3 (Hold) company has lost 26.6% in the past three months compared with the Textile - Apparel industry’s 9% decline.
Image Source: Zacks Investment Research
LULU’s Regional Mix Shifts Toward Overseas Growth
International markets did most of the heavy lifting, with revenues increasing 22% y/y (up 16% in constant dollars). China Mainland net revenues rose 30% year over year to $478.4 million (23% in constant dollars), while the Rest of World segment generated $372.0 million, up 13% (9% in constant dollars). Comps momentum also skewed overseas, with China Mainland up 20% (13% in constant dollars) and Rest of World up 5% (1% in constant dollars).
The Americas business remained the key drag. Net revenues in the region declined 3% year over year (down 4% in constant dollars). Within the Americas segment, revenues declined 3% year over year in Canada (down 6% in constant dollars) and 4% in the United States, on both reported and constant-dollar basis.
This underscores that the company’s growth engine is currently being powered more by market expansion outside North America than by broad-based demand improvement at home.
lululemon athletica inc. Price, Consensus and EPS Surprise
lululemon’s Channels & Categories Show Mixed Demand
By channel, store-led growth returned, supported by ongoing fleet expansion and optimizations. Store channel sales increased 3% year over year. Digital also contributed, with e-commerce revenues rising 4% and representing $1 billion, or 40% of quarterly sales.
Category trends were similarly mixed: men’s revenues increased 7% year over year and women’s rose 4%, while accessories and other revenues declined 1%. The split suggests demand remained healthiest in core apparel, particularly men’s, while discretionary add-on categories lagged.
LULU’s Tariffs & Markdowns Pressure Gross Margin
Profitability weakened sharply as higher costs weighed on product economics. The gross margin declined 410 basis points (bps) year over year to 54.2%, driven by a 330-bps product margin pressure and 140 bps of fixed-cost deleverage. We expected the gross margin to contract 380 bps year over year to 54.5% for the fiscal first quarter.
Management attributed the product margin decline primarily to tariffs and markdowns. Tariffs reduced the gross margin by 280 bps in the quarter, partially offset by 100 bps of benefit tied to enterprise efficiency initiatives. Markdowns increased 40 bps, while higher occupancy and depreciation costs contributed to the fixed-cost deleverage. Favorable foreign exchange provided a 60-bps tailwind but was not enough to offset the broader cost headwinds.
lululemon’s Costs Rise on Activations & Proxy Contest
Operating expenses also moved higher as the company leaned into brand activity and reintroduced costs that were reduced last year. Selling, general and administrative (SG&A) expenses rose 12.4% to $1.1 billion. SG&A expenses, as a percentage of net revenues, of 42.9%, reflected 310 bps of year-over-year deleverage. Drivers included higher employee costs, the timing of brand activations and expenses tied to the proxy contest.
Our model predicted SG&A expenses to rise 11.1% year over year for the fiscal first quarter, with a 330-bps increase in the SG&A expense rate to 43.1%.
The combination of gross margin compression and SG&A deleverage made operating income fall to $276.9 million, with the operating margin contracting 730 bps to 11.2% from 18.5% in the year-ago quarter.
Our model predicted a 37% year-over-year decline in adjusted operating income to $276.5 million. We estimated the operating margin to decline 710 bps to 11.4%.
Snapshot of LULU’s Store Plans
In first-quarter fiscal 2025, lululemon opened 5 net new stores, including 11 store openings and six closures. The company also completed six optimizations. As of May 3, 2026, it operated 816 stores.
In the second quarter of fiscal 2026, the company expects to open 13 net new company-operated stores and complete 13 store optimizations. For fiscal 2026, lululemon expects to be closer to the low-end of the 40-45 net new company-operated stores target and complete 35 optimizations. Store openings in fiscal 2026 are expected to include 10-15 in North America, including about eight locations in Mexico.
Additionally, the company expects 25-30 store openings in the international markets in fiscal 2026, with the majority planned for China. LULU expects overall square footage growth in the low-double digits for fiscal 2026.
lululemon’s Other Financial Details
LULU ended first-quarter fiscal 2026 with $1.5 billion in cash and cash equivalents. Inventory was $1.7 billion, up 2% on a dollar basis, while unit inventory decreased about 4%, reflecting the impacts of higher tariff rates and foreign exchange. The company also repurchased 2.2 million shares for $358.3 million in the fiscal first quarter.
For fiscal 2026, the company expects dollar inventory to increase in the low to mid-single digits and inventory per unit to be down slightly. For fiscal 2026, lululemon expects capital expenditure of $700-$720 million.
As of May 3, 2026, the company had $1 billion remaining under its share repurchase program. LULU expects the repurchase levels in fiscal 2026 to be broadly in line with fiscal 2025.
LULU’s Outlook Reflects Softer Trends in Q2
In the earnings call, management cited a recent moderation in sales trends tied to spikes of negative brand commentary and product launches that have not met expectations, and noted it is moving with urgency to adjust product and increase marketing and community activations.
Management’s near-term outlook points to a tougher demand and margin setup in the fiscal second quarter. LULU expects net revenues of $2.45-$2.475 billion, implying a 2-3% decline from the prior-year period. The company guides earnings to decline to $1.76-$1.81 per share from the $3.10 reported in the year-ago quarter.
By region, management expects North America revenues to decline in the low double digits in the fiscal second quarter, with the United States also down in the low double digits. China Mainland revenues are expected to increase in the mid to high-teens, while Rest of World revenues are projected to rise in the high single to low double digits.
LULU projected the gross margin to contract 410 bps year over year, led by higher tariff costs, and ongoing investments in store openings, optimizations and distribution network. Tariffs expected to be a 150-bps headwind, with offsets of 100 bps. Meanwhile, markdowns are likely to rise 50 bps due to additional seasonal clearance. The company also anticipates SG&A deleverage of 500 bps in the fiscal second quarter, reflecting lower sales, proxy-related costs, increased marketing and higher store labor expenses.
LULU expects the second-quarter fiscal 2026 operating margin to contract 910 bps year over year to 11.6%. LULU estimates an effective tax rate of 30% for the fiscal second quarter.
lululemon’s Targets for FY26
For fiscal 2026, LULU lowered its outlook and expects revenues of $11-$11.15 billion, suggesting flat to a 1% year-over-year fall. Earlier, the company expected net revenues of $11.35-$11.5 billion. lululemon projects earnings of $10.95-$11.15 per share, suggesting a dip from the $13.26 reported in fiscal 2025. Earlier, the company projected an EPS of $12.10-$12.30.
Regionally, management expects North America revenues to decline in the high single digits, with the United States slightly weaker and Canada relatively better. China Mainland revenues are projected to rise 20%, while Rest of World revenues are expected to increase in the mid-teens.
LULU forecasts the gross margin to decline 90 bps year over year, driven mainly by fixed-cost deleverage and ongoing investments in new store openings, optimizations and the distribution center network. Markdowns are expected to be flat to slightly improved for the year, while tariffs are expected to have a gross impact of 30 bps that the company expects to offset almost entirely.
The updated outlook assumes a 10% incremental tariff rate in the fiscal second quarter (down from a prior assumption of about 20%), while maintaining a 20% incremental tariff rate assumption for the back half of fiscal 2026. The guidance also assumes no recovery of tariffs paid under IEEPA.
For SG&A, management expects 290 bps of deleverage versus fiscal 2025, reflecting incentive compensation, store labor hours and continued investments to support growth, especially market expansion, improved omni capabilities and increased brand awareness. The outlook also incorporates costs layered back after reductions last year, one-time proxy contest expenses and higher marketing spending to rebuild brand momentum.
Overall, lululemon expects the fiscal 2026 operating margin to decline 380 bps from last year and projects an effective tax rate of 30% (versus registered 29.5% in fiscal 2025).
Solid Picks in LULU’s Broader Industry
We have highlighted three better-ranked stocks from the same industry, namely Columbia Sportswear Company (COLM - Free Report) , Vince Holding Corp. (VNCE - Free Report) and Ralph Lauren Corporation (RL - Free Report) .
Columbia Sportswear engages in the sourcing, marketing and distribution of outdoor and active lifestyle apparel, footwear, accessories and equipment in the United States and internationally. COLM sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Columbia Sportswear’s 2026 sales and EPS indicates growth of 2.6% and 4.6%, respectively, from the year-ago period’s reported figures. Columbia Sportswear has a trailing four-quarter earnings surprise of 44.1%, on average.
Vince Holding operates as a retail company in the United States and internationally. VNCE has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for VNCE’s fiscal 2026 sales and earnings indicates growth of 4.5% and 25%, respectively, from the year-ago period’s reported figures. VNCE has a trailing four-quarter earnings surprise of 647.2%, on average.
Ralph Lauren is a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia and internationally. RL currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2027 sales and earnings indicates growth of 5.9% and 9.8%, respectively, from the year-ago period’s reported figures. RL has a trailing four-quarter earnings surprise of 9.1%, on average.
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report
predicting the 7 stocks that will soar highest in the coming month.
View the Zacks #1 Rank List
Image: Bigstock
lululemon Q1 Earnings & Revenues Beat Estimates, FY26 Guidance Soft
Key Takeaways
lululemon athletica inc. (LULU - Free Report) delivered first-quarter fiscal 2026 results, wherein revenues and earnings per share (EPS) surpassed the Zacks Consensus Estimate. The company delivered year-over-year top-line growth, supported by strength in its international business. However, the bottom line declined from the prior year, reflecting margin pressure from higher markdowns, tariff-related costs and elevated SG&A expenses.
lululemon’s fiscal first-quarter EPS of $1.69 declined 35% year over year but surpassed the Zacks Consensus Estimate of $1.67 by 1.2%.
The Vancouver, Canada-based company’s quarterly revenues increased 4% from the year-ago period to $2.47 billion and 2% on a constant-dollar basis. Revenues beat the Zacks Consensus Estimate of $2.43 billion by 1.6%. The quarter’s top-line growth was driven by strong international demand, even as comparable sales (comps) declined 2% on a constant-dollar basis and North America remained under pressure.
Total comps rose 1% year over year and declined 2% on a constant-dollar basis. Comps in the Americas dipped 5% on a reported basis and 6% on a constant-dollar basis. Internationally, comps increased 13% on a reported basis and 18% on a constant-dollar basis. Our model predicted comps growth of 0.3% for the fiscal first quarter.
Shares of the company declined 11.5% in the after-hours trading session on June 4, 2026, following the soft earnings performance in first-quarter fiscal 2026 and a bleak guidance. The Zacks Rank #3 (Hold) company has lost 26.6% in the past three months compared with the Textile - Apparel industry’s 9% decline.
Image Source: Zacks Investment Research
LULU’s Regional Mix Shifts Toward Overseas Growth
International markets did most of the heavy lifting, with revenues increasing 22% y/y (up 16% in constant dollars). China Mainland net revenues rose 30% year over year to $478.4 million (23% in constant dollars), while the Rest of World segment generated $372.0 million, up 13% (9% in constant dollars). Comps momentum also skewed overseas, with China Mainland up 20% (13% in constant dollars) and Rest of World up 5% (1% in constant dollars).
The Americas business remained the key drag. Net revenues in the region declined 3% year over year (down 4% in constant dollars). Within the Americas segment, revenues declined 3% year over year in Canada (down 6% in constant dollars) and 4% in the United States, on both reported and constant-dollar basis.
This underscores that the company’s growth engine is currently being powered more by market expansion outside North America than by broad-based demand improvement at home.
lululemon athletica inc. Price, Consensus and EPS Surprise
lululemon athletica inc. price-consensus-eps-surprise-chart | lululemon athletica inc. Quote
lululemon’s Channels & Categories Show Mixed Demand
By channel, store-led growth returned, supported by ongoing fleet expansion and optimizations. Store channel sales increased 3% year over year. Digital also contributed, with e-commerce revenues rising 4% and representing $1 billion, or 40% of quarterly sales.
Category trends were similarly mixed: men’s revenues increased 7% year over year and women’s rose 4%, while accessories and other revenues declined 1%. The split suggests demand remained healthiest in core apparel, particularly men’s, while discretionary add-on categories lagged.
LULU’s Tariffs & Markdowns Pressure Gross Margin
Profitability weakened sharply as higher costs weighed on product economics. The gross margin declined 410 basis points (bps) year over year to 54.2%, driven by a 330-bps product margin pressure and 140 bps of fixed-cost deleverage. We expected the gross margin to contract 380 bps year over year to 54.5% for the fiscal first quarter.
Management attributed the product margin decline primarily to tariffs and markdowns. Tariffs reduced the gross margin by 280 bps in the quarter, partially offset by 100 bps of benefit tied to enterprise efficiency initiatives. Markdowns increased 40 bps, while higher occupancy and depreciation costs contributed to the fixed-cost deleverage. Favorable foreign exchange provided a 60-bps tailwind but was not enough to offset the broader cost headwinds.
lululemon’s Costs Rise on Activations & Proxy Contest
Operating expenses also moved higher as the company leaned into brand activity and reintroduced costs that were reduced last year. Selling, general and administrative (SG&A) expenses rose 12.4% to $1.1 billion. SG&A expenses, as a percentage of net revenues, of 42.9%, reflected 310 bps of year-over-year deleverage. Drivers included higher employee costs, the timing of brand activations and expenses tied to the proxy contest.
Our model predicted SG&A expenses to rise 11.1% year over year for the fiscal first quarter, with a 330-bps increase in the SG&A expense rate to 43.1%.
The combination of gross margin compression and SG&A deleverage made operating income fall to $276.9 million, with the operating margin contracting 730 bps to 11.2% from 18.5% in the year-ago quarter.
Our model predicted a 37% year-over-year decline in adjusted operating income to $276.5 million. We estimated the operating margin to decline 710 bps to 11.4%.
Snapshot of LULU’s Store Plans
In first-quarter fiscal 2025, lululemon opened 5 net new stores, including 11 store openings and six closures. The company also completed six optimizations. As of May 3, 2026, it operated 816 stores.
In the second quarter of fiscal 2026, the company expects to open 13 net new company-operated stores and complete 13 store optimizations. For fiscal 2026, lululemon expects to be closer to the low-end of the 40-45 net new company-operated stores target and complete 35 optimizations. Store openings in fiscal 2026 are expected to include 10-15 in North America, including about eight locations in Mexico.
Additionally, the company expects 25-30 store openings in the international markets in fiscal 2026, with the majority planned for China. LULU expects overall square footage growth in the low-double digits for fiscal 2026.
lululemon’s Other Financial Details
LULU ended first-quarter fiscal 2026 with $1.5 billion in cash and cash equivalents. Inventory was $1.7 billion, up 2% on a dollar basis, while unit inventory decreased about 4%, reflecting the impacts of higher tariff rates and foreign exchange. The company also repurchased 2.2 million shares for $358.3 million in the fiscal first quarter.
For fiscal 2026, the company expects dollar inventory to increase in the low to mid-single digits and inventory per unit to be down slightly. For fiscal 2026, lululemon expects capital expenditure of $700-$720 million.
As of May 3, 2026, the company had $1 billion remaining under its share repurchase program. LULU expects the repurchase levels in fiscal 2026 to be broadly in line with fiscal 2025.
LULU’s Outlook Reflects Softer Trends in Q2
In the earnings call, management cited a recent moderation in sales trends tied to spikes of negative brand commentary and product launches that have not met expectations, and noted it is moving with urgency to adjust product and increase marketing and community activations.
Management’s near-term outlook points to a tougher demand and margin setup in the fiscal second quarter. LULU expects net revenues of $2.45-$2.475 billion, implying a 2-3% decline from the prior-year period. The company guides earnings to decline to $1.76-$1.81 per share from the $3.10 reported in the year-ago quarter.
By region, management expects North America revenues to decline in the low double digits in the fiscal second quarter, with the United States also down in the low double digits. China Mainland revenues are expected to increase in the mid to high-teens, while Rest of World revenues are projected to rise in the high single to low double digits.
LULU projected the gross margin to contract 410 bps year over year, led by higher tariff costs, and ongoing investments in store openings, optimizations and distribution network. Tariffs expected to be a 150-bps headwind, with offsets of 100 bps. Meanwhile, markdowns are likely to rise 50 bps due to additional seasonal clearance. The company also anticipates SG&A deleverage of 500 bps in the fiscal second quarter, reflecting lower sales, proxy-related costs, increased marketing and higher store labor expenses.
LULU expects the second-quarter fiscal 2026 operating margin to contract 910 bps year over year to 11.6%. LULU estimates an effective tax rate of 30% for the fiscal second quarter.
lululemon’s Targets for FY26
For fiscal 2026, LULU lowered its outlook and expects revenues of $11-$11.15 billion, suggesting flat to a 1% year-over-year fall. Earlier, the company expected net revenues of $11.35-$11.5 billion. lululemon projects earnings of $10.95-$11.15 per share, suggesting a dip from the $13.26 reported in fiscal 2025. Earlier, the company projected an EPS of $12.10-$12.30.
Regionally, management expects North America revenues to decline in the high single digits, with the United States slightly weaker and Canada relatively better. China Mainland revenues are projected to rise 20%, while Rest of World revenues are expected to increase in the mid-teens.
LULU forecasts the gross margin to decline 90 bps year over year, driven mainly by fixed-cost deleverage and ongoing investments in new store openings, optimizations and the distribution center network. Markdowns are expected to be flat to slightly improved for the year, while tariffs are expected to have a gross impact of 30 bps that the company expects to offset almost entirely.
The updated outlook assumes a 10% incremental tariff rate in the fiscal second quarter (down from a prior assumption of about 20%), while maintaining a 20% incremental tariff rate assumption for the back half of fiscal 2026. The guidance also assumes no recovery of tariffs paid under IEEPA.
For SG&A, management expects 290 bps of deleverage versus fiscal 2025, reflecting incentive compensation, store labor hours and continued investments to support growth, especially market expansion, improved omni capabilities and increased brand awareness. The outlook also incorporates costs layered back after reductions last year, one-time proxy contest expenses and higher marketing spending to rebuild brand momentum.
Overall, lululemon expects the fiscal 2026 operating margin to decline 380 bps from last year and projects an effective tax rate of 30% (versus registered 29.5% in fiscal 2025).
Solid Picks in LULU’s Broader Industry
We have highlighted three better-ranked stocks from the same industry, namely Columbia Sportswear Company (COLM - Free Report) , Vince Holding Corp. (VNCE - Free Report) and Ralph Lauren Corporation (RL - Free Report) .
Columbia Sportswear engages in the sourcing, marketing and distribution of outdoor and active lifestyle apparel, footwear, accessories and equipment in the United States and internationally. COLM sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Columbia Sportswear’s 2026 sales and EPS indicates growth of 2.6% and 4.6%, respectively, from the year-ago period’s reported figures. Columbia Sportswear has a trailing four-quarter earnings surprise of 44.1%, on average.
Vince Holding operates as a retail company in the United States and internationally. VNCE has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for VNCE’s fiscal 2026 sales and earnings indicates growth of 4.5% and 25%, respectively, from the year-ago period’s reported figures. VNCE has a trailing four-quarter earnings surprise of 647.2%, on average.
Ralph Lauren is a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia and internationally. RL currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2027 sales and earnings indicates growth of 5.9% and 9.8%, respectively, from the year-ago period’s reported figures. RL has a trailing four-quarter earnings surprise of 9.1%, on average.