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lululemon athletica (LULU) is under heavy pressure today after reporting its Q2 (Jul) results last night, despite a robust EPS beat, trading to a new 5-year low. Revenue came in on the soft side at $2.53 bln, and the 6.5% yr/yr increase was its slowest in over 4 years. The larger issue falls on its Q3 and FY26 EPS and revenue guidance; both were below consensus, with FY26 guidance being cut.. In particular, its FY26 EPS guidance has now been cut two consecutive quarters, with the cut this quarter much more significant (current guidance is now $12.77-12.97, down from $14.58-14.79).

• Its US business was particularly challenged. Premium athletic wear in the US continued its decline in Q2, and consumers are more selective, spending less on apparel overall, even more so in performance activewear, as noted by management. US revenue is now expected to decline 1-2% for the year.
• Management feels it has missed opportunities in new product launches, most notably in social and lounge, with product cycles running too long and failing to create new trends. It intends to increase new styles of its overall assortment to 35% from 23% by next spring. With many new players entering the performance activewear market, the heightened competition underscores the need for stronger differentiation.
• This is evidenced in its US comp of -4% (-3% CC), decelerating from -2% (-1% CC) in Q1 (Apr). Its international business accelerated with a comp of +15% (+13% CC), compared to +6% (+7% CC) in Q1, though still lower than the +22% comp in Q4 (Jan).
• There are growing concerns surrounding its business in China, its second largest market, with Q2 revenue coming in at the low end of its expectations and beginning to see signs of macro-driven headwinds in Tier 1 cities.

Briefing.com Analyst Insight

LULU's struggles highlight how exposed it is to the softening US consumer and to an increasingly competitive athletic wear landscape. The EPS cuts, particularly two consecutive downward revisions for FY26, are raising doubts about whether management's growth strategy is on track. Also, this marks the third steep drop in the stock on earnings in 2025, underscoring investor concern over recent performance. While international growth remains a bright spot, it is not enough to offset the weakness in its core US market, where trends in premium apparel are deteriorating. The missteps on innovation and product cycles underscore execution risks, and with new initiatives not expected until 2026, the near-term setup for the stock remains challenging.