LULULEMON shares dropped 15% Thursday after the company reported a 4% revenue decline in the second fiscal quarter and slashed full-year earnings guidance to $9.48-$9.73 per share from $10.95-$11.15—a reduction of $1.22 at the midpoint.
Net income for Q2 fell to $329.2 million, or $2.92 per share, versus $370.9 million, or $3.10 per share, in the year-ago period. Comparable sales declined 9%. Gross profit contracted 1% to $1.5 billion, though gross margin expanded 560 basis points after a $134.5 million tariff refund.
Interim CEO Meghan Frank attributed the shortfall to "inconsistent" product launches and "pressure on the brand in both of our largest markets." She singled out leggings—a core category—for a larger-than-expected slowdown. Frank also cited negative social media commentary as a headwind to Q2 performance.
Full-year net revenue guidance fell to $10.35-$10.5 billion from $11-$11.15 billion, representing a 5-7% decline.
Frank said management is focused on introducing new styles and optimizing inventory "to drive an inflection in our business." Heidi O'Neill assumes the CEO role next week, succeeding Frank.
