Lululemon Cuts Fiscal 2026 Outlook, Citing Slowing Leggings Demand

Lululemon Athletica (LULU) management lowered its revenue and earnings forecasts for the year on September 3, projecting that fiscal 2026 revenue will land 5% to 7% below fiscal 2025 levels. The company expects earnings per share to fall to a range of $9.48 to $9.73, down from $13.26 in the prior fiscal year, with the new guidance already incorporating $0.86 per share from tariff refunds booked in the second quarter.

The downward revision follows a period of deteriorating sales performance. Revenue grew 1.7% over the past twelve months to $11.1 billion, a sharp deceleration from the 9.2% growth recorded in the previous twelve-month period. In the latest quarter, revenue declined by 4.3% compared to a year earlier. Management specifically noted that leggings sales fell approximately 20% in the fiscal second quarter and that trends for that category have remained below expectations so far in fiscal 2026. The forecast also assumes that sales in North America will weaken further in the second half of the fiscal year.

Profitability has compressed alongside the top-line slowdown. Lululemon’s operating margin stood at 17.8% over the past twelve months, down from 23% a year ago. For the upcoming fiscal third quarter, management guides for an operating margin of about 6.5%, a significant drop from the 17% recorded in the same period last year. A margin result below this guide in the next report would indicate that profit is shrinking faster than anticipated.

The stock has struggled to reflect these operational changes relative to broader market trends. LULU shares have lost about 47% over the past twelve months, while the S&P 500 returned approximately 16%. The stock currently trades at a multiple of 7.4 times earnings, compared to 21.5 for the S&P 500. Historical data tracked by Trefis shows that Lululemon stock has fallen significantly more than the index during market shocks since 2008.

In nine tracked market shocks, Lululemon stock fell an average of 38.8%, whereas the S&P 500 dropped 19.2%. The largest decline occurred during the 2008-2009 Global Financial Crisis, when Lululemon lost 91% of its value while the index lost 53%. Recovery times have also been extended; in the median case, it took the stock 4.4 months to reach its previous high after a drop. However, three recoveries lasted more than a year, including 13.8 months after the 2022 Inflation Shock and 29 months after the 2013 Taper Tantrum.

The Taper Tantrum episode was particularly distinct because it was specific to Lululemon rather than a market-wide event. During that period, Lululemon stock lost 41% while the S&P 500 barely moved. The company’s balance sheet remains comparable to peers, with debt equal to 20.4% of its market value, similar to the S&P 500 average of 20.8%.