Lululemon Athletica Inc.

For Q1, total net revenue rose 4% year over year, or 2% in constant currency, to $2.5 billion, and comparable sales decreased 2%. Gross profit was $1.34 billion, or 54.2% of revenue, versus 58.3% a year ago, and gross margin declined 410 basis points year over year. Operating income was $277 million, or 11.2% of revenue, and net income was $195 million, or $1.69 per diluted share, versus $2.60 in Q1 2025. North America revenue decreased 3%, China Mainland revenue increased 30%, and Rest of World revenue increased 13%. For Q2, management expects revenue of $2.45 billion to $2.475 billion, down 2% to 3%, gross margin down about 410 basis points, EPS of $1.76 to $1.81, and North America revenue to decline in the low double digits. For full-year 2026, revenue is now expected to be $11 billion to $11.15 billion, flat to down 1%, gross margin to decline about 90 basis points, and EPS to be $10.95 to $11.15.

Meghan Frank said the company’s priorities are to strengthen North America while continuing to expand the global growth engine, and she framed the quarter as showing some encouraging signs before a late-Q1/early-Q2 slowdown. She pointed to two main issues: spikes in negative brand commentary on media/social channels and some product launches that did not meet expectations. Her tone was urgent but constructive, emphasizing that the company is acting quickly through faster chase inventory, more marketing and brand activations, and enterprise efficiency work to restore momentum.

Frank gave a detailed financial rundown: Q1 revenue of $2.5 billion, gross profit of $1.34 billion, gross margin of 54.2%, SG&A of about $1.06 billion or 42.9% of revenue, operating income of $277 million, and EPS of $1.69. She said gross margin fell 410 basis points mainly because of tariffs, markdowns, and fixed-cost deleverage; tariffs had a 280 basis point negative impact in Q1, partially offset by 100 basis points from enterprise efficiency initiatives. On the balance sheet, the company ended with $1.5 billion in cash and cash equivalents, nearly $600 million of revolver capacity, inventory of $1.7 billion, and about $1 billion remaining on its share repurchase authorization; it repurchased 2.2 million shares at an average price of $165.

Analysts pressed on whether the weakness was more about product design, fashion shifts, macro conditions, or brand issues, and management said traffic fell broadly across demographics and regions, with negative commentary and some underperforming launches the biggest drivers. Questions also focused on markdowns, where management said Q2 is the high-water mark and that markdowns should improve sequentially into the back half. On China, management said the brand-noise impact has subsided and reaffirmed roughly 20% full-year growth, while also saying North America trends were weak mainly over the last 6 to 7 weeks and that the company is not yet assuming meaningful upside from the new initiatives in guidance.