Lululemon Athletica Inc (NASDAQ:LULU) shares fell about 10% in after-hours trading on Thursday after the athletic apparel retailer issued guidance pointing to a potential decline in sales, despite reporting first-quarter results that narrowly topped Wall Street expectations.
The company projected second-quarter revenue between $2.45 billion and $2.475 billion, which would represent a year-over-year decline of 3% to 2%.
For the full fiscal year 2026, Lululemon now expects revenue between $11 billion and $11.15 billion, implying a decline of 1% to flat growth compared with the prior year.
Lululemon noted that its guidance does not include the impact of any potential IEEPA tariff refunds or future share repurchases.
“We have been navigating headwinds that have led us to adjust our outlook for the full year,” Lululemon interim co-CEO and chief financial officer Meghan Frank said in a statement.
“We have assessed the business and are taking additional actions to reposition where needed and further strengthen our product engine. We remain confident in our path forward."
For the first quarter of fiscal 2026, Lululemon posted revenue of $2.5 billion, up 4% from a year earlier and above analysts' consensus estimate of $2.43 billion. Diluted earnings per share came in at $1.69, slightly ahead of the $1.68 analysts had expected, according to consensus estimates.
The company reported that comparable sales increased 1% during the quarter, though they declined 2% on a constant-currency basis.
In the Americas, net revenue fell 3%, while comparable sales dropped 5%. International markets continued to outperform, with revenue rising 22% and comparable sales increasing 13%.
Profitability, however, came under pressure. Gross profit declined 3% to $1.3 billion, while gross margin contracted 410 basis points to 54.2%. Operating income fell 37% to $276.9 million, reducing operating margin to 11.2% from the prior year's level. Diluted earnings per share declined from $2.60 in the year-earlier quarter.
During the quarter, Lululemon repurchased 2.2 million shares for approximately $358.3 million and opened five net new company-operated stores, ending the period with 816 locations worldwide.