Lululemon athletica (NASDAQ:LULU) shares fell around 12% in premarket trading on Friday after the athletic apparel retailer reduced its revenue and earnings expectations for fiscal 2026, citing ongoing challenges that have prompted management to revise its outlook.
The guidance reduction overshadowed quarterly results that broadly met market expectations and highlighted the difficult backdrop facing consumer-focused companies as shoppers remain cautious with discretionary spending.
First-Quarter Results Meet Expectations
For the first quarter of fiscal 2026, Lululemon reported earnings of $1.69 per share on revenue of $2.47 billion.
The figures were largely in line with analyst forecasts, which had projected earnings of $1.69 per share on revenue of $2.44 billion.
Comparable sales increased 1% during the quarter, supported by strong international demand, where comparable sales rose 13%. However, performance in the Americas remained under pressure, with comparable sales declining 5%.
Despite the weakness, interim co-chief executive officer and chief financial officer Meghan Frank said there had been a “sequential improvement in full-price sales” within the region.
Second-Quarter Forecast Falls Short of Expectations
Looking ahead, the company issued guidance for the current quarter that came in below Wall Street estimates.
Lululemon expects second-quarter earnings to range between $1.76 and $1.81 per share, with revenue projected between $2.45 billion and $2.475 billion.
Both earnings and revenue forecasts fell short of analysts’ expectations, adding to investor concerns about near-term demand trends.
Company Cuts Full-Year Revenue and Profit Targets
Management also lowered its outlook for the full fiscal year.
Lululemon now expects fiscal 2026 earnings of $10.95 to $11.15 per share on revenue of $11.0 billion to $11.15 billion.
The revised forecast compares with the company’s previous guidance for earnings of $12.10 to $12.30 per share and revenue of $11.35 billion to $11.50 billion.
“More recently, we have been navigating headwinds that have led us to adjust our outlook for the full year,” interim co-CEO Frank said in a statement.
“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,” she added.
Analysts Debate Whether Challenges Are Product or Brand Related
Following the guidance cut, Bernstein analyst Aneesha Sherman questioned whether Lululemon’s current difficulties stem primarily from product-related issues or represent a broader challenge for the brand itself.
Sherman asked whether the situation was a product issue that was “gradually fixable over the next year” or a brand issue that “could weigh down sales and valuation for years to come?”
She also warned that “A prolonged period of high markdowns, together with repeated concerns around quality and materials, could further erode LULU’s brand equity, which will be harder (and slower) to fix.”
In response, Sherman lowered her price target on the stock to $145 from $170.
Leadership Changes and Governance Progress Offer Bright Spots
While the company has faced operational and financial pressures, it has also recorded several notable corporate developments in recent months.
In April, Lululemon announced the appointment of former Nike executive Heidi O’Neill as its next chief executive officer, a move aimed at strengthening leadership as the company seeks to reignite growth.
The following month, the retailer resolved a governance dispute with founder and major shareholder Chip Wilson, ending a proxy battle by agreeing to appoint two directors supported by Wilson to the company’s board.
These developments have been viewed as positive steps as Lululemon works to address performance challenges and reposition the business for longer-term growth.