Lululemon supplied a weak 2026 outlook on Tuesday as tariffs, larger bills and a dramatic proxy battle with its founder weigh on its backside line.
The athleisure firm’s steering for each the present quarter and the fiscal yr got here in decrease than anticipated on the highest and backside traces.
Lululemon is anticipating first-quarter gross sales to be between $2.40 billion and $2.43 billion, weaker than estimates of $2.47 billion, based on LSEG. It anticipates earnings per share will vary between $1.63 and $1.68, additionally weaker than estimates of $2.07.
For the complete yr, Lululemon is anticipating gross sales to be between $11.35 billion and $11.50 billion, beneath expectations of $11.52 billion. Earnings steering of $12.10 to $12.30 per share was additionally far weaker than estimates of $12.58.
“The work is basically underway by way of our motion plan, and we’re actually targeted on the significance in fact correcting on quite a lot of fronts,” interim co-CEO Meghan Frank instructed CNBC in an interview. “We have got a brand new inventive director, his first line is hitting in Q1, we’re seeing some inexperienced shoots, I might say, from the product in Q1 so we’re enthusiastic about a few of the momentum we now have on that line merchandise. We have now had some nice response from a few of our current product activations, after which we’re additionally decreasing our pace to market timeline.”
Throughout Lululemon’s vacation quarter, the corporate beat estimates on each the highest and backside traces, although Wall Avenue had lowered its expectations for the interval in current months.
Here is how the Vancouver-based retailer carried out throughout its fiscal fourth quarter in contrast with what Wall Avenue was anticipating, based mostly on a survey of analysts by LSEG:
- Earnings per share: $5.01 vs. $4.78 anticipated
- Income: $3.64 billion vs. $3.58 billion anticipated
The corporate’s internet revenue for the three-month interval that ended Feb. 1 was $586.9 million, or $5.01 per share, in contrast with $748.4 million, or $6.14 per share, a yr earlier.
Gross sales rose barely to $3.64 billion, up about 1% from $3.61 billion a yr earlier.
Lululemon raised its fiscal fourth-quarter steering throughout the ICR convention in Orlando earlier this yr, so all eyes have been on the corporate’s 2026 steering following greater than a yr of underperformance.
The retailer, all the time thought-about a premium model that hardly ever supplied promotions, had been leaning on reductions to drive gross sales and transfer stock. The corporate is now working to drag again that technique this yr, Frank stated. Lululemon expects the transfer will weigh on gross sales within the close to time period, however it should carry the corporate again to a full-price enterprise over time, she stated.
In the meantime, it is seeing quite a lot of pressures on its backside line. Larger tariffs and the top of the de minimis exemption proceed to be a significant price for the corporate.
This yr, Lululemon expects tariffs to price the corporate $380 million, up from $275 million final yr, on a gross foundation. As soon as mitigation efforts are taken into consideration, the web affect is anticipated to be $220 million in 2026, up from $213 million in 2025.
Lululemon has been negotiating with suppliers and taking different actions to scale back its publicity to tariffs, however it is not growing costs to offset the added prices, particularly because it appeared to promotions to drive gross sales in current months. The model was already priced towards the excessive finish of the market previous to President Donald Trump’s tariff hikes final yr, leaving it with fewer instruments in its arsenal to offset the duties, particularly because it faces intense competitors and a slowdown within the athleisure market.
Final yr, the corporate raised costs on a choose variety of gadgets. Consumers are nonetheless responding favorably up to now, however there aren’t any plans to construct on these will increase for now, stated Frank.
Past tariffs, the corporate can be seeing larger bills from advertising, labor, incentives and prices associated to its proxy contest with founder Chip Wilson. Wilson, Lululemon’s largest impartial shareholder, has been pressuring the corporate to make modifications to its board of administrators and has criticized it for dropping sight of its inventive imaginative and prescient.
Simply earlier than releasing earnings, Lululemon introduced it was including former Levi Strauss CEO Chip Bergh to its board of administrators. Bergh was not among the many candidates Wilson put ahead for consideration, however he does have appreciable public firm expertise and spent round 13 years as Levi’s CEO. Throughout his tenure with the corporate, Levi started pursuing a extra worthwhile direct promoting technique and gross sales rose by round 30%.
As a part of the announcement, Lululemon stated board member David Mussafer, managing associate and chairman of personal fairness agency Introduction, won’t stand for re-election throughout the firm’s upcoming 2026 shareholder assembly on the conclusion of his present three-year time period. The announcement marks a win for Wilson, who has criticized Mussafer publicly. In a letter to shareholders final month, Wilson identified that Mussafer was overseeing the board’s interview course of for potential nominees at a time when he was up for election, creating a possible battle of curiosity.
A supply aware of the matter stated Wilson had referred to as on Mussafer to step down from the board as a result of he lacks impartial management, amongst different points.
Mussafer did not instantly reply to a request for remark.
Previous to the earnings announcement, Wilson issued an announcement saying shareholders can be “critically evaluating” any claims of success or enchancment from Lululemon when it launched outcomes.
“The core subject at lululemon is one the Firm has struggled with for years: there’s a disconnect between the Firm’s inventive engine and the Board’s understanding for a way model energy and product excellence gasoline cultural energy, margin sturdiness and long-term shareholder worth,” he stated.
Lululemon declined to remark.
Whereas elements of Lululemon’s enterprise are nonetheless rising, it has primarily seen that growth in China and in different worldwide areas, which make up a fraction of total income. Identical-store gross sales in its largest area, the Americas, have not grown in round two years, and Lululemon is anticipating one other yr of declines in 2026.
The corporate stated it expects gross sales within the Americas to say no between 1% and three% in 2026.
In the meantime, gross sales in China are anticipated to develop round 20%, and the remainder of the world by a mid-teens proportion.
