Lululemon shares plunged below $100 in extended trading Thursday after the athletic-apparel company cut its full-year outlook again, reported a sharp decline in comparable sales and acknowledged that efforts to refresh its product lineup have not generated the response management expected.
The stock fell about 18% after hours to roughly $99.65 after closing the regular session at $121.77. Lululemon shares were already down more than 40% in 2026 before the earnings release and have lost nearly 70% from their levels in early 2025.
The reaction came despite Lululemon beating Wall Street’s adjusted earnings expectations.
For the fiscal second quarter ended August 2, revenue declined 4% from a year earlier to $2.42 billion, missing the roughly $2.46 billion analysts surveyed by LSEG expected. Comparable sales fell 9%, or 10% in constant currencies.
Adjusted earnings came to approximately $2.06 per share, above the roughly $1.79 consensus estimate. GAAP earnings were considerably higher at $2.92 per diluted share, but that figure included a one-time benefit worth $0.86 per share from tariff refunds and associated interest.
Net income declined to $329.2 million from $370.9 million a year earlier, while operating income fell 13% to $453.7 million.
The earnings beat was not enough to overcome the deterioration in sales and management’s much weaker expectations for the rest of the year.
Lululemon Cuts 2026 Guidance Again
Management now expects fiscal 2026 revenue between $10.35 billion and $10.50 billion, representing a decline of 5% to 7%.
Its previous forecast called for revenue to be roughly flat or down as much as 1%.
Full-year diluted earnings are now expected between $9.48 and $9.73 per share, down sharply from the previous $10.95 to $11.15 range.
That guidance includes the $0.86-per-share benefit from the tariff refund already recognized during the second quarter, making the reduction in the underlying operating outlook even more notable.
The third-quarter forecast also points to continued weakness rather than an immediate recovery.
Lululemon expects revenue of $2.29 billion to $2.32 billion, a decline of 10% to 11% from a year earlier, with earnings between $0.93 and $0.98 per share.
For investors, that means the company’s problems are no longer confined to one disappointing quarter. Management is explicitly forecasting another double-digit revenue decline in the current period.
Americas Sales Continue to Deteriorate
The biggest problem remains Lululemon’s largest market.
Revenue in the Americas declined 8% during the second quarter after increasing 1% a year earlier. Comparable sales in the region dropped an even steeper 12%.
That weakness comes as Lululemon faces growing competition from newer premium athletic and lifestyle brands including Alo Yoga and Vuori, which have been expanding their stores, marketing and product offerings.
Lululemon has acknowledged that its own assortment has lacked enough fresh product to keep customers engaged.
Sales of leggings, one of the categories most closely associated with the brand, fell roughly 20% during the quarter, according to management commentary reported by Reuters. Efforts to introduce more loose-fitting silhouettes have not yet generated enough demand to offset weakness in the company’s traditional fitted styles.
Interim co-CEO and CFO Meghan Frank said the company had expected a better response to some of its product initiatives and acknowledged that there is “significant work ahead.”
That product issue may be more important to the long-term investment case than the quarterly earnings miss itself.
Lululemon built much of its premium valuation on a combination of brand loyalty, product differentiation and consistent full-price demand. If consumers increasingly view competing brands as more fashionable or innovative, fixing the business may require more than promotions or short-term cost reductions.
Competitive data already point to pressure.
Lululemon’s share of the athleisure market fell about 10 percentage points from a year earlier to 43.9% in August, according to M Science data cited by Reuters. Alo Yoga gained 5.9 percentage points of share, while Vuori gained 2.2 points.
China Loses Momentum After Years of Strong Growth
International markets had previously provided an important offset to slower North American growth, but the second quarter showed weakness there as well.
Total international revenue increased 4%, or 2% in constant currencies, but comparable international sales declined 3%.
China Mainland revenue rose 4% on a reported basis but declined 2% in constant currencies. Comparable sales in China fell 8% in constant currencies.
That represents a major slowdown from a year earlier, when China revenue was growing at a double-digit pace.
Management said negative consumer commentary following a marketing campaign on the Great Wall of China contributed to the weakness. The campaign featured a Japanese taiko drum and generated criticism in China.
The episode adds another challenge for the company’s incoming leadership because international expansion has been one of the central pillars of Lululemon’s long-term growth strategy.
Margins Look Better Than the Underlying Business
At first glance, Lululemon’s gross margin appeared to improve substantially.
Gross margin increased 200 basis points from a year earlier to 60.5%.
However, the company received $134.5 million of refunds tied to International Emergency Economic Powers Act tariffs, plus $4.1 million of associated interest. Those refunds added approximately 560 basis points to gross margin.
Without that benefit, underlying gross margin would have been materially weaker.
Operating margin fell 190 basis points to 18.8% even with the tariff benefit included.
Selling, general and administrative expenses also increased to just over $1 billion from about $952 million a year earlier, rising to 41.7% of revenue from 37.7%.
Those figures show why investors should be careful about reading too much into the headline margin expansion. The tariff refund provided a significant temporary lift while sales declined and operating expenses consumed a greater percentage of revenue.
Lululemon still maintains a strong balance sheet.
The company ended the quarter with approximately $1.39 billion in cash and cash equivalents and another $593.7 million available under its revolving credit facility.
Inventory was nearly unchanged at $1.71 billion, while inventory units declined 7%, which may reduce some of the risk of having to aggressively discount excess merchandise.
Lululemon also repurchased 2.7 million shares during the quarter for $330 million.
Michael Burry Says He Will Buy More Below $100
The earnings collapse has put additional attention on investor Michael Burry, who has made Lululemon one of his most prominent disclosed investments.
Burry described Lululemon as the “trickster” in his portfolio after the earnings release but said the disappointing quarter did not change his investment thesis.
According to the Yahoo Finance report, Lululemon represents about 17.4% of Burry’s disclosed portfolio.
Burry said he had expected the quarterly results to be weak and had previously warned that the company could disappoint.
Rather than exit following the after-hours decline, he said he intended to add to the position if Lululemon remained below $100.
“I continue to hold lululemon, and I will buy more of it if it trades under $100 tomorrow morning,” Burry wrote, adding that the stock was roughly 20% below his most recent purchase price.
He also pointed to previous investments including Adobe, Molina Healthcare and Veeva Systems as examples of stocks that suffered substantial declines before recovering.
His broader point was that deep-value positions can require unusually long holding periods and considerable volatility.
Burry’s conviction is an investor opinion, not evidence that Lululemon’s turnaround will succeed. The company’s own numbers currently show declining revenue, falling comparable sales and substantially reduced earnings expectations.
New CEO Heidi O’Neill Inherits a Difficult Turnaround
The earnings report arrives only days before Heidi O’Neill takes over as Lululemon’s new chief executive on September 8.
O’Neill spent 27 years at Nike and most recently served as Nike’s president of consumer, product and brand. Lululemon’s board selected her following an extensive CEO search.
Her immediate priorities will likely be clear from Thursday’s results: restore product innovation, improve brand momentum in North America, stabilize China, strengthen marketing and prevent competitors from taking additional share.
The company has already settled a proxy battle with founder Chip Wilson, removing one governance distraction before O’Neill takes control.
But a product turnaround cannot happen instantly. Apparel companies design and source collections months in advance, meaning decisions made by the incoming CEO may take several seasons before they materially affect reported sales.
That delay is one reason investors reacted so severely to the latest guidance cut. The company is not forecasting a near-term stabilization while leadership changes take place.
What Lululemon Investors Should Watch Next
The third quarter will provide the first major test.
Management’s forecast for a 10% to 11% revenue decline suggests conditions may deteriorate further before improving. A better-than-expected result could provide early evidence that demand is stabilizing, while another miss would make Lululemon’s turnaround more difficult.
Americas comparable sales will be especially important. The latest 12% decline indicates that weakness in Lululemon’s largest market remains severe.
Product performance also deserves close attention. Investors will want to see whether new styles can offset the roughly 20% decline in leggings and whether management can produce merchandise that draws customers back without relying heavily on markdowns.
China will be another key indicator. The region had been one of Lululemon’s strongest growth markets, and returning to sustained growth there could help offset some North American weakness.
Margins may become more revealing as well. The $134.5 million tariff refund boosted second-quarter profitability, but management’s revised guidance does not assume additional refunds. Future quarters should therefore give investors a cleaner picture of underlying merchandise margins, discounting and sourcing costs.
For the stock, falling below $100 creates a very different valuation than investors were assigning Lululemon only a few years ago. That lower price is exactly what has attracted investors such as Burry.
But the market is no longer valuing Lululemon primarily as a high-growth premium apparel company. Thursday’s 18% after-hours decline reflects a business facing falling sales, weaker brand momentum and another major reduction in expectations.
The next phase will depend on whether O’Neill can turn Lululemon’s still-powerful brand into renewed product demand—and whether the deterioration in North America begins to slow before competitors take additional ground.