Lululemon Athletica Inc.

Total net revenue decreased 4%, or 5% in constant currency, to $2.4 billion, and comparable sales decreased 10%. Gross profit was $1.46 billion, gross margin was 60.5% versus 58.5% a year ago, and diluted EPS was $2.92 versus $3.10 last year. North America revenue declined 8% with comps down 12%; China Mainland revenue increased 4% reported and declined 2% constant currency with comps down 8%; Rest of World revenue increased 5% reported and 6% constant currency with comps down 3%. For Q3, the company guided revenue to $2.29 billion to $2.32 billion, down 10% to 11%, with EPS of $0.93 to $0.98 and gross margin down about 250 bps. For full-year 2026, it now expects revenue of $10.35 billion to $10.5 billion, gross margin down about 80 bps, and EPS of $9.48 to $9.73; it also expects about 35 net new company-operated stores and capital expenditures of about $680 million to $700 million.

Meghan Frank emphasized that lululemon is responding to a weaker-than-expected business with actions across product, brand and cost, rather than waiting for trends to improve on their own. She said the company is chasing harder into winners like Groove and Define, expanding marketing investments, and tightening expenses while still protecting product and brand investment. Her tone was sober but confident in the brand’s longer-term strength, and she repeatedly framed Heidi O’Neill’s arrival as an opportunity to take a fresh look at strategy.

Frank gave a detailed financial rundown and highlighted several pressures and offsets. Gross margin rose 200 bps in Q2 to 60.5% on a $134.5 million pretax tariff-refund benefit, but excluding the refund the margin would have been down materially, reflecting tariff costs, markdowns and fixed-cost deleverage. SG&A was $1.01 billion, or 41.7% of revenue, and the company ended Q2 with $1.4 billion in cash, nearly $600 million of revolver capacity, $1.7 billion of inventory, and about $713 million remaining on its buyback authorization; she said repurchases remain the preferred way to return cash and are expected to be in line with 2025.

Analysts pressed management on whether the problem is traffic, product, or a broader cost-structure issue, and whether the company needs to rationalize stores or leases. Management said traffic pressure was the biggest issue across both North America and China, while also acknowledging that some new product is not resonating and that the company is taking a deeper look at the cost base. Questions also focused on China promotions and Tmall; management said the issue there was brand sentiment and event-related noise, and that the company remains focused on full-price selling while using selective, full-price brand events rather than broad discounting.