Q2 2026 lululemon athletica inc. Earnings Call Transcript
Key Points
- Lululemon Athletica Inc (LULU) is seeing strong guest engagement and positive response to community events like the SeaWheeze Half Marathon, which had nearly 10,000 runners and 85,000 virtual participants, leading to a decision to bring it back next year.
- The company is successfully chasing into strong-performing product styles, with approximately 20% more volume being reordered this year compared to last year, including items like the Groove Wide Leg and Align Foldover Jogger.
- Gross margin improved by 200 basis points in Q2, driven by a 150 basis point benefit from IEEPA tariff refunds and 100 basis points from enterprise efficiency initiatives.
- Lululemon Athletica Inc (LULU) is taking aggressive steps to manage its expense base, including reducing net new store openings to 35 and cutting pop-up stores from 65 to approximately 40 by the end of 2026.
- The company is seeing positive traction in newer product categories like away-from-body bottoms for women and men's golf tops, which are benefiting from ambassador storytelling campaigns featuring athletes like Lewis Hamilton.
- Lululemon Athletica Inc (LULU) maintains a strong balance sheet with $1.4 billion in cash and is continuing its share repurchase program, having bought back 2.7 million shares at an average price of $120 in Q2.
- Lululemon Athletica Inc (LULU) lowered its full-year guidance, now expecting revenue to decline 5% to 7% and EPS in the range of $9.48 to $9.73, down from $13.26 in 2025.
- The company is experiencing significant sales declines in its core leggings category, with sales down approximately 20% in Q2, which has not been fully offset by growth in other styles.
- North America revenue declined 8% in Q2, and the company expects a slower trend in the second half, with Q3 North America revenue projected to decline in the mid-teens.
- China Mainland performance was well below expectations, with revenue growing only 4% (down 2% in constant currency) due to negative brand sentiment from media commentary and a softer Tmall 618 event.
- The company is facing inconsistent performance across its product assortment, with some new launches not resonating with guests, leading to increased markdowns and a need for additional seasonal clearance.
- Q3 operating margin is expected to be approximately 6.5% versus 17% in the prior year, driven by significant SG&A deleverage of 800 basis points and increased marketing investments.
Thank you for standing by. This is the conference operator. Welcome to the lululemon athletica inc. second quarter 2026 earnings conference call. (Operator Instructions) I would now extend the conference over to Howard Tubin, Vice President, Investor Relations for lululemon Athletica. Please go ahead.
Thank you, and good afternoon. Welcome to lululemon's second quarter earnings conference call. Joining me today are Meghan Frank, Interim Co-CEO and CFO; and Andre Maestrini, interim Co-CEO, President and Chief Commercial Officer.
Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements reflecting management's current forecast of certain aspects of lululemon's future. These statements are based on current information, which we have assessed, but by which its nature is dynamic and subject to rapid and even abrupt changes.
Actual results may differ materially from those contained in or implied by
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