Lululemon athletica faced a sharp decline in shares following the release of a disappointing earnings report for Q2 2026 and a revised outlook.
Lululemon's Financial Performance
On Thursday, Lululemon shares closed at $206.09 but plunged to $165.33 in pre-market trading, marking a 19.78% drop. The company's shares have lost 46.11% year-to-date, while the S&P 500 gained 10.55%. Over the past five years, Lululemon's stock has declined by 42.98%, indicating significant underperformance compared to market benchmarks.
Impact of New Tariffs on Earnings
Lululemon predicts a loss of approximately $240 million this year due to new tariffs and the removal of tax exemptions. CFO Meghan Frank noted that the policy changes will have a "significant impact" on the company's earnings. The sales forecast for the next three months has been lowered to between $2.47 billion and $2.5 billion, below analyst expectations.
Market and Competitive Landscape
The company faces increasing competitive pressure from lower-priced rivals, including Vuori and Alo Yoga. CEO Calvin McDonald acknowledged that Lululemon has missed emerging trends as product cycles became too predictable. With a market capitalization of $24.7 billion, the company needs to navigate both external tariff pressures and internal operational challenges to restore investor confidence.
Despite current challenges, Lululemon maintains relatively strong financial metrics. However, optimizing operations and addressing tariff pressures will be key to the company's future success.
