10-Q · June 4, 2026
Lululemon Athletica reported Q1 2026 results with a slight revenue increase of 4% year-over-year to $2.47 billion, slightly missing the consensus estimate of $2.48 billion. However, diluted EPS of $1.69 was below…
Earnings analysis · 10-Q
LULU earnings analysis
Filed September 3, 2026 · Our reading of the company's report
The latest report
Lululemon's second-quarter revenue declined 4.3% year over year to $2.416 billion, while operating margin fell 190 basis points to 18.8% and diluted EPS declined 5.8% to $2.92. The $134.5 million tariff refund…
Read full summary
Lululemon's second-quarter revenue declined 4.3% year over year to $2.416 billion, while operating margin fell 190 basis points to 18.8% and diluted EPS declined 5.8% to $2.92. The $134.5 million tariff refund temporarily lifted gross margin to 60.5%, masking continued demand weakness, particularly in the Americas where comparable sales declined 12%. International revenue grew, liquidity was strong, and first-half operating cash flow improved to $589.3 million, but higher SG&A, CEO-transition uncertainty, tariff exposure, and broad comparable-sales declines support a bearish trend assessment.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
Reported figures
- Earnings per share
- $2.92
What stood out
-
EPS declined despite tariff benefit
Second-quarter diluted EPS was $2.92 versus $3.10 in the prior-year quarter, a decrease of $0.18 or 5.8%. EPS included $0.86 per share from IEEPA tariff refunds and associated interest.
-
Tariff refund lifted gross margin
Gross margin increased 200 basis points to 60.5%, although the benefit included $134.5 million of IEEPA tariff refunds, which contributed 560 basis points to gross margin.
-
International revenue continued to grow
China Mainland and Rest of World revenue grew 3.6% to $407.1 million and 4.7% to $391.8 million, respectively. The company opened 15 net new stores in China Mainland and 10 in Rest of World since the prior-year quarter.
-
Operating cash flow improved
First-half operating cash flow was $589.3 million, up $379.6 million from $209.7 million in the prior-year period, primarily due to a $464.7 million improvement in operating-asset and liability cash flows.
-
Aggressive share repurchases continued
The company repurchased 4.9 million shares for $695.1 million during the first two quarters of 2026, compared with 2.5 million shares for $715.7 million in the prior-year period.
-
Liquidity remained strong
Liquidity remained substantial, with $1.390 billion of cash and cash equivalents, $754.2 million of working capital excluding cash, and $593.7 million of available revolving-credit capacity as of August 2, 2026.
What to watch
-
Broad comparable-sales contraction
Global comparable sales fell 9% in the quarter, including a 12% decline in the Americas. Management cited reduced traffic, lower conversion rates, and lower average order value, indicating broad demand and brand-momentum pressure.
-
Tariff costs and refund uncertainty
Tariff exposure remains material: the company paid $230 million of IEEPA tariffs and received $134.5 million in refunds during the quarter, but had not recognized an asset for additional claims as of August 2, 2026. The filing also identifies ongoing uncertainty around new tariffs and the de minimis exemption.
-
CEO transition and governance disruption
The former CEO stepped down on January 31, 2026, interim co-CEOs are leading during the transition, and Heidi O’Neill is scheduled to become CEO on September 8, 2026. The company also incurred $24.8 million of proxy-contest-related costs in the first two quarters, creating execution and governance-transition risk.
-
Operating deleverage intensified
First-half operating expenses increased faster than revenue: SG&A rose $171.8 million, or 9.1%, while revenue declined $8.6 million. Corporate expenses increased $64.5 million to $771.0 million, pressuring operating leverage.
-
Transfer-pricing uncertainty increased
The IRS withdrew from bilateral APA negotiations in August 2026 after the prior agreement expired at the end of 2020. The company continues applying its transfer-pricing methodology, but future audits or changes in profit allocation could affect its effective tax rate.
Management's outlook
The 10-Q does not provide numeric revenue or EPS guidance. The filing states that tariff-policy volatility makes it more difficult to provide reliable financial guidance; the quantitative 2026 outlook was provided in the September 3, 2026 earnings release.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.