Lululemon’s (LULU) incoming CEO Heidi O’Neill has her work cut out for her after the company slashed its full-year revenue outlook and reported weaker-than-expected second quarter earnings guidance.
Shares of the active apparel company tumbled 9% in afternoon trading on Friday and were on track to close at their lowest level since 2018.
For the second quarter of 2026, Lululemon expects net revenue to be in the range of $2.45 billion to $2.48 billion, while Wall Street was looking for $2.6 billion. Adjusted earnings are expected to be in the range of $1.76 to $1.81, lower than the Street’s forecast of $2.69.
“More recently, we have been navigating headwinds that have led us to adjust our outlook for the full year,” interim co-CEO and CFO Meghan Frank said. On the earnings call, Frank said that recent product launches and “negative commentary in the media and on social channels” led to lower traffic in the quarter.
“We saw good guest response from some of the products that we launched … but didn’t see the halo that we had hoped for and had in our plans,” Frank said, explaining that the color and style of some items didn’t resonate with consumers.
The negative commentary was tied to Lululemon founder Chip Wilson’s recent proxy fight with the company that he launched in late December. The company reached an agreement last week, and Frank said the negative press “died down and subsided,” but Lululemon has not yet seen trends return to where they were prior to December.
“We’re closely monitoring and feel it’s prudent … to update our range in terms of what we’re seeing today and the trend of the business,” Frank added.
For the full year, the company cut its revenue outlook to $11 billion to $11.15 billion, down from the previously expected range of $11.35 billion to $11.5 billion. The guidance for adjusted earnings also came in lower and is now seen in the range of $10.95 to $11.15, compared with previous expectations of $12.10 to $12.30.
Revenue grew 4% to $2.47 billion, just above the $2.44 billion the Street forecast, while adjusted earnings per share came in line with estimates at $1.69. Same-store sales grew 1%, slightly above the expected 0.1% decline.
Heidi O’Neill, a former Nike veteran, is set to start as CEO on Sept. 8. She faces a tall order as competition increases and sales slow. Frank said the product launches in the second quarter so far did “not generate the anticipated guest response.”
Lululemon “is in a transition period right now with a new CEO coming in in September … and it does appear to be affecting sales,” Morningstar’s David Swartz told Yahoo Finance, adding that “there are reasons for optimism right now.”
