Lululemon slashed its full-year guidance and missed revenue expectations for the first time in over two years, following a misstep with a key product launch and slowing growth in the Americas.
The activewear giant now forecasts annual revenue between $10.38 billion and $10.48 billion, down from an earlier estimate of $10.7 billion to $10.8 billion.
Expected earnings per share were also lowered to $13.95-$14.15, a dip from the previous range of $14.27-$14.47.
In its fiscal second quarter, Lululemon posted earnings of $3.15 per share, beating Wall Street’s $2.93 estimate, but fell short on revenue, reporting $2.37 billion versus the expected $2.41 billion.
While shares initially dropped, they rebounded in extended trading, gaining over 2%.
The company’s net income for the quarter ending July 28 reached $393 million, a notable rise from $342 million a year ago.
Sales grew by 7% year-over-year to $2.37 billion, but comparable sales lagged, with a mere 2% increase against a projected 5.9%, largely due to a 3% decline in the Americas.
Lululemon’s Breezethrough leggings, launched in July, faced criticism for their fit, leading the company to pull the product shortly after release.
CEO Calvin McDonald acknowledged the misstep, framing it as a “test and learn” moment.
Despite the setback, McDonald emphasized that Lululemon’s brand remains strong, particularly in the men’s segment, even as the U.S. women’s business faces challenges due to a lack of new styles.
The product hiccups come on the heels of the departure of Chief Product Officer Sun Choe in May, sparking concerns about Lululemon’s innovation pipeline.
However, McDonald assured that a succession plan was in place, with Jonathan Cheung and Nikki Neuburger stepping into key roles to drive the brand forward.
As Lululemon navigates these bumps, it’s doubling down on operational efficiency and profitability.
Despite sales pressures, the company’s gross profit climbed 9% to $1.4 billion, with a gross margin of 59.6%, exceeding analyst expectations.
International markets, particularly China, offered a bright spot, with sales surging 29%.
Lululemon’s journey underscores the unpredictable nature of the business world, where even giants stumble, but resilience and strategic pivots can keep them in the game.
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