"Lululemon ( Nasdaq: LULU) enters Q2 earnings facing a delicate balance: new product innovation is resonating, but the U.S. consumer remains cautious, traffic is soft, and tariffs are pressuring gross margins. Last quarter (Q1 FY26), revenue grew 7% to $2.4B, but EPS was flat at $2.60. Management reaffirmed full-year revenue guidance, yet trimmed operating margin outlook due to incremental tariff drag."
"Tariff mitigation and pricing - LULU faces ~110 bps gross margin compression in FY26, largely from tariffs. Management plans modest price hikes and sourcing shifts, with relief expected in H2. U.S. consumer softness - Traffic was down in Q1; comps rose just 1%. Management admits consumers are "cautious and intentional" in spending. Investors will watch for any rebound in Q2."
Revenue grew 7% to $2.4 billion in Q1 FY26 while EPS remained flat at $2.60, and full-year revenue guidance was reaffirmed. Tariffs are expected to compress gross margins by roughly 110 basis points in FY26, prompting modest price hikes and sourcing shifts with relief anticipated in H2. U.S. traffic was soft and comps rose only 1%, with consumers described as cautious and intentional, increasing sensitivity to promotional activity. Mainland China revenue rose 21% and is guided to grow 25–30% in FY26, with expansion to about 200 stores. Early product hits sold out, but units rose 16% and additional markdowns of 10–20 bps are planned for H2.
Read at 24/7 Wall St.
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