Lululemon stock falls after analyst cuts earnings estimates

Lululemon Athletica Inc (NASDAQ: LULU ) stock is in focus after Guggenheim Partners lowered its earnings estimates for the company, citing concerns that the U.S. business has not yet completed its sales reset.

The apparel company’s stock is trading lower on Friday after it reported mixed second-quarter financial results and lowered its fiscal year 2026 guidance to below analyst estimates.

In a note on Thursday, Guggenheim Partners cut its fiscal 2026 and fiscal 2027 earnings-per-share estimates to $8.90 and $7.96, respectively.

The prior estimates were $10.16 and $9.45.

Both figures remain below Guggenheim Partners’ estimates of $10.84 and $11.18 for the respective years, as of earlier today.

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North America, which includes the U.S. and Canada, declined 8.5% year-over-year, an outcome the firm said was better than the company’s guidance for a low-double-digit decline.

China Mainland sales rose 4% year-over-year, below the company’s guidance range of mid-to-high-teens percentage growth.

Rest-of-world sales also rose 4%, below the guided range of high-single-digit to low-double-digit growth.

Third-Quarter Guidance Points Lower The company’s third-quarter guidance calls for a mid-teens to low-double-digit percentage sales decline and an earnings-per-share decline of about 60% year-over-year, excluding tariff refunds, according to the note.

Guggenheim said it views the sales guidance as the beginning rather than the end of a reset in domestic revenue.

Gross Margin Beats But Trails Peers Lululemon’s second-quarter gross margin rose about 200 basis points year-over-year to 60.5%, including a tariff refund benefit of about 560 basis points, or approximately $134.5 million, per the note.

Excluding that benefit, gross margin of 54.9% beat both the company’s guidance and the Guggenheim Partners’ estimate of 54.4%.

Guggenheim said the underlying 355-basis-point year-over-year decline was the weakest gross margin performance among the retailers it covers this quarter, compared with a median increase of 20 basis points.

Inventory Levels Decline Lululemon exited the second quarter with inventory dollars down 1% year-over-year, compared with a 2% increase entering the quarter, while inventory units fell 7%, versus a 4% decline entering the quarter.

Management guided for inventory to rise in the low-single-digit percentage range by the end of the third quarter, with units down slightly, the note said.

LULU Stock Price Activity: Lululemon Athletica shares were down 17.59% at $100.35 at the time of publication on Friday, according to Pro data.

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