Lululemon’s second-quarter revenue came in at $2.42 billion, down 4 percent from a year earlier, and comparable sales fell 9 percent. Then the company lowered its forecast, and the shares dropped to an eight-year low.
Sales were weakest in the Americas, its biggest market, where comparable sales slid 12 percent. International sales rose 4 percent but could not make up the difference. Operating margin narrowed to 18.8 percent from 20.7 percent.
The headline profit flatters the quarter. Diluted earnings were $2.92 a share, yet tariff refunds and related interest supplied $0.86 of that.
The new outlook
Lululemon now expects full-year revenue of $10.35 billion to $10.50 billion, a drop of 5 to 7 percent. Its earlier forecast was $11 billion to $11.15 billion. For the third quarter it sees revenue falling another 10 to 11 percent.
Heidi O’Neill takes over as chief executive on September 8, and the situation she inherits is a difficult one: fading demand in North America, product problems, and a stock that has already reset far lower. GuruFocus, writing about the results, said her next test is whether she can steady the Americas business and build product momentum before the holiday season.
