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lululemon reported Q2 FY2027 revenue of $2.4 billion, below the $2.5 billion consensus. Adjusted earnings per share, as counted by the consensus, were $2.06, above the $1.79 estimate.
Revenue fell from $2.5 billion a year earlier. The filing attributed the decline primarily to the Americas, where revenue fell 8% as traffic, conversion and average order value declined. China Mainland revenue rose 4% and Rest of World revenue rose 5%, although comparable sales fell in both regions.
Gross margin rose to 60.5% from 58.5%, while operating margin fell to 18.8% from 20.7%. The filing said tariff refunds added 560 basis points to both margins; higher tariffs, markdowns and fixed costs also affected gross margin. Selling, general and administrative expenses rose as a share of revenue, partly because of higher head-office costs.
Diluted earnings per share were $2.92, down from $3.10, including $0.86 per share from tariff refunds and associated interest after tax. Free cash flow rose to $225.2 million from $150.8 million.
| Q2 FY2027 | Q2 FY2026 | Change | |
|---|---|---|---|
| Revenue | $2.4 billion | $2.5 billion | −4.34% |
| Diluted EPS | $2.92 | $3.10 | −5.81% |
| Gross margin | 60.5% | 58.5% | 2.0 percentage points |
| Operating margin | 18.8% | 20.7% | −2.0 percentage points |
| Free cash flow | $225.2 million | $150.8 million | 49.3% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $2.06 | $1.79 | Beat by 15.1% |
| Revenue | $2.4 billion | $2.5 billion | Missed by 2.07% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
Interim Co-CEO and CFO Meghan Frank said revenue came in below the company’s expectations, predominantly because of China Mainland. She said negative media and social-channel commentary affected traffic, while some new product launches drew a softer response than planned. Interim Co-CEO Andre Maestrini said the commentary hurt brand sentiment in China and affected both stores and digital sales.
Frank said leggings sales declined approximately 20% in Q2, more than expected, as guests shifted toward looser silhouettes. She said newer away-from-body styles had gained traction but had not fully offset the decline. Asked which products were working, Frank also pointed to Define, Scuba and the golf assortment, adding that lululemon was reordering into styles receiving a better response.
On pricing, Frank told analysts the company had more seasonal product to clear by year-end: “It’s seasonal clearance, primarily at end of season.” She said the company was seeking to increase the share of sales made at full price. Maestrini said lululemon was not joining promotional events in Australia, where purchasing had slowed as the market became more promotional.
Frank said higher tariffs and markdowns reduced product margin in Q2, while tariff refunds lifted gross margin. She also pointed to fixed costs associated with stores and regional mix, as well as fulfillment costs as the company adjusts its North American distribution network.
For the second half, Frank said lululemon was increasing marketing investment while looking for savings in areas including travel, professional fees and store labor hours. Asked about costs, she said the company was taking a deeper look at its cost base while protecting product and brand investment, but it was “too early to share beyond the guidance” for the year.
Frank said Q3 had started slowly and that the outlook assumed a slower North American revenue trend than in Q2, with international performance relatively consistent with Q2 trends.
Guidance
Frank said lululemon lowered its full-year guidance after assessing current sales trends. She said the revised outlook assumed a slower revenue trend in North America in the second half than in Q2, and international performance relatively consistent with Q2 trends.