Lululemon Athletica Inc. (NASDAQ: LULU) shares tumbled sharply after the company released first-quarter fiscal 2026 results that highlighted a deepening divergence between international strength and persistent weakness in the Americas. The stock closed the regular session at $124.92, down 0.88%, but then plunged to $110.82 in after-hours trading, a decline of 11.29%.
The company reported revenue of $2.5 billion, a 4% increase from a year earlier (2% on a constant-dollar basis), but this top-line growth masked significant regional cracks. Americas net revenue fell 3% (down 4% constant dollar), and comparable sales in the region dropped 5% (6% constant dollar). In contrast, international net revenue surged 22% (16% constant dollar), led by a 22-23% jump in China, where comparable sales advanced 13%.
Profitability deteriorated markedly. Gross profit fell 3% to $1.3 billion, with gross margin contracting 410 basis points to 54.2%, as heavier discounting and unfavorable product mix took a toll. Operating income slid 37% to $276.9 million, pushing the operating margin 730 basis points lower to 11.2%. Diluted earnings per share slumped to $1.69 from $2.60 a year earlier, missing expectations and signaling deeper cost pressures.
The most damaging blow came from a sharp cut to full-year guidance. Lululemon now expects fiscal 2026 revenue between $11.00 billion and $11.15 billion, implying a decline of up to 1% to flat growth, while earnings per share are projected at $10.95–$11.15, drastically below earlier forecasts. For the second quarter, management guided revenue of $2.450 billion to $2.475 billion, down 2-3%, and EPS of $1.76–$1.81. The outlook included additional headwinds from softer U.S. demand, competitive pressure from brands like Alo Yoga and Vuori, and a leadership transition as former Nike executive Heidi O’Neill prepares to take over as CEO in September.
Despite these operational challenges, the balance sheet remained relatively sturdy with $1.5 billion in cash and $593.6 million available under a credit facility. The company repurchased 2.2 million shares for $358.3 million during the quarter and expanded its store count to 816. Inventories rose 2% in dollar terms but declined 4% in units, suggesting manageable stock levels. However, management cautioned that its revised guidance does not account for potential tariff impacts, future buybacks, or further macroeconomic shifts, leaving additional uncertainty ahead.
