Lululemon cuts full-year outlook on weaker traffic and sentiment

Lululemon Athletica Inc. (NASDAQ: LULU ) stock is trading sharply lower Friday after the company cut its full-year outlook.

Lululemon cited weaker brand sentiment and traffic, particularly in North America and China.

Revenue fell 4% year over year to $2.4 billion and declined 5% on a constant-currency basis.

Comparable sales dropped 10%.

North America revenue fell 8%.

That included an 8% decline in the U.S. and an 11% drop in Canada.

China Mainland revenue rose 4% on a reported basis but fell 2% in constant currency.

Rest of World revenue increased 5%, or 6% in constant currency.

During the earnings call, Lululemon said negative commentary across media and social channels weighed on traffic and sales momentum.

In China, management said spikes in negative commentary around the end of the first quarter and early in the second quarter hurt brand sentiment, contributing to softer traffic across both stores and digital channels.

Management said traffic remains the biggest driver of weakness across both China and North America.

Store sales declined 6%.

Digital revenue also fell 6% to about $900 million, accounting for 39% of total revenue.

Lululemon's Margins Get Refund Boost Gross margin expanded 200 basis points to 60.5%.

IEIPA refunds contributed 560 basis points to the improvement.

However, product margin fell 150 basis points.

Tariffs, excluding refunds, weighed on gross margin by 160 basis points.

Efficiency initiatives added 100 basis points.

Meanwhile, markdowns reduced margin by 70 basis points.

Fixed-cost deleverage weighed on gross margin by 230 basis points, while foreign exchange provided a 20-basis-point benefit.

Lululemon ended the quarter with 825 stores.

Global square footage increased 11%, with 41 net new stores added since the second quarter of 2025.

Cash totaled $1.4 billion.

The company also had nearly $600 million of available revolving-credit capacity.

Inventory stood at $1.7 billion, down 1% in dollars and about 7% in units.

Lululemon repurchased about 2.7 million shares at an average price of $120.

About $713 million remained under its authorization.

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However, away-from-body styles such as Groove Wide Leg, Aligned Fold Over Jogger, Breezelee and the updated Dance Studio Pant performed well.

Lululemon is chasing about 20% more volume this year to respond faster to stronger-selling products.

The Define franchise remained strong.

Scuba and Steady State products featuring SuperLoft fabric also gained traction.

Men's revenue fell 1%, with Metal Vent Tech tees and golf tops providing support.

Accessories revenue dropped 13% despite strength in backpacks.

The company's Summer series reached tens of thousands of guests across 70 cities.

The returning SeaWheeze event attracted nearly 10,000 runners from 24 countries and about 14,000 festival attendees.