Lululemon athletica has tightened its expectations for the year, cutting Lululemon FY26 guidance after a softer first quarter in the Americas offset strong international momentum. While the company still delivered overall revenue growth, management said more recent trading headwinds prompted a reassessment of the full-year outlook, reflecting uneven demand patterns and profitability pressure.
Full-year outlook trimmed
The retailer now forecasts fiscal 2026 net revenue of $11.0 billion to $11.15 billion, a reduction versus earlier expectations and implying up to a 1% decline compared with the previous view. Diluted earnings per share are now projected in the range of $10.95 to $11.15.
Q1: topline up, but the Americas weigh on comps
For the quarter ended 3 May 2026, net revenue rose 4% year on year to $2.5 billion. Growth came primarily from international markets, where revenue jumped 22% (or 16% on a constant dollar basis). The Americas, however, moved in the opposite direction, with revenue down 3% (or 4% in constant dollars).
Comparable sales increased 1% overall, but the split was stark: a 5% decline in the Americas versus a 13% increase internationally—an imbalance that highlights where the business is gaining traction and where demand is cooling.
Profitability pressured as margins fall
Despite the sales increase, profitability weakened materially. Gross profit declined 3% to $1.3 billion, and gross margin contracted 410 basis points to 54.2%. Operating income fell 37% to $276.9 million, with operating margin down 730 basis points to 11.2%.
Diluted EPS for the quarter dropped to $1.69 from $2.60 a year earlier. The effective tax rate rose to 31.8% from 30.2%.
Capital returns, stores and inventory
During the quarter, lululemon repurchased 2.2 million shares for $358.3 million and opened five net new company-operated stores, bringing its global fleet to 816 locations. Ending inventory stood at $1.7 billion, up 2% year on year, though inventory units were down 4%, suggesting a tighter unit position even as value ticked higher.
Interim co-CEO and CFO Meghan Frank said the company saw some early signs of progress in North America, but conditions later shifted enough to warrant a guidance reset. “We experienced a solid start to 2026 as our teams executed with speed, agility, and discipline. Our work to drive improvements in North America resulted in some positive signals in the quarter, including a sequential improvement in full-price sales.
“More recently, we have been navigating headwinds that have led us to adjust our outlook for the full year. We have assessed the business and are taking additional actions to reposition where needed and further strengthen our product engine. We remain confident in our path forward,” Frank said.
Q2 outlook points to a revenue decline
For the second quarter, the company expects net revenue of $2.45 billion to $2.475 billion, implying a year-on-year decrease of roughly 3% to 2%. Diluted EPS is projected at $1.76 to $1.81, based on an estimated tax rate of about 30%.
With international demand still growing but the Americas under pressure, Lululemon FY26 guidance now reflects a more cautious stance on near-term sales and profit trends, while management signals it is taking additional steps to reset positioning and protect longer-term brand momentum.
