Lululemon’s Q2 slide deepens as demand falls across the US and China

Lululemon posted second-quarter revenue of $2.4 billion, down 4 percent from a year earlier, as comparable sales fell 9 percent globally. Net income dropped 11 percent to $329.2 million, and diluted earnings per share came in at $2.92, down 6 percent. The results included $134.5 million in refunds tied to International Emergency Economic Powers Act tariffs, plus $4.1 million in associated interest. Strip that out and the underlying profit is weaker than the reported gross margin of 60.5 percent, up 200 basis points, would appear.

Americas weakness deepens while China falls short of expectations

The regional picture diverged sharply. Americas net revenue fell 8 percent and comparable sales dropped 12 percent, the steepest decline in the business. China Mainland net revenue rose 4 percent on a reported basis but fell 2 percent at constant currency, with comparable sales down 8 percent in constant-currency terms, a result executives called “well below” their expectations. Rest of World, spanning EMEA and Asia-Pacific outside China, grew 5 percent, or 6 percent in constant currency.

Running and tennis take Lululemon beyond its yoga roots

To rebuild traffic, Lululemon is leaning harder into activations that stretch its identity well past yoga and Pilates. In June, the company ran a summer series of free yoga, Pilates and sculpt classes across 70 cities in the US and Canada. In August it revived its SeaWheeze half marathon and festival in Vancouver for the first time since 2019, drawing nearly 10,000 runners from 24 countries and roughly 14,000 attendees to an evening concert headlined by DJ John Summit; a companion virtual challenge on Strava pulled in more than 85,000 participants from 120 countries, prompting an early decision to repeat the event next summer.

The brand is now active at the US Open and plans a presence at the New York, Chicago, Berlin and Toronto marathons this autumn, part of a broader push into running as a second pillar alongside its studio heritage. In tennis, ambassador Guo Hanyu became the first Chinese athlete on Lululemon’s roster to win a Grand Slam title, at Wimbledon, giving the brand a foothold in a sport it has only recently begun to court.

The Great Wall misstep that deepened Lululemon’s China problem

That expansion has not offset the damage in China. Management acknowledged on the call that a Great Wall anniversary event misfired in May, when a drum used on stage was identified as Japanese rather than Chinese, triggering a swift backlash on Weibo.

E-commerce was further hurt by a decision not to repeat last year’s participation in Tmall’s June 18 shopping festival, or in the promotions that followed it. Lululemon is now trying to restore consideration for the brand through its “Together Feels Better” campaign, which included a livestream broadcast across five platforms featuring ambassador and Olympic swimming champion Wang Shun, with further activations planned around a Tmall Super Brand Day and a World Mental HealthDay event.

Fewer SKUs and stores, more marketing spend

On the cost side, executives are cutting SKU density in North American stores, reorganizing merchandising by activity rather than category, and refreshing the website’s homepage and category pages ahead of a product-page update.

New store growth is also being trimmed, to about 35 net new company-operated locations this year from roughly 40 guided last quarter, while the pop-up fleet is set to shrink from 65 at the end of last year to around 40 by the close of 2026. At the same time, the company is increasing marketing spend in the back half of the year, directing more of it toward creator and social content, including a YouTube series built around its elite athletes.

Weaker guidance greets Lululemon’s incoming CEO

For the third quarter, Lululemon guided to revenue of $2.29 billion to $2.32 billion, a decline of 10 to 11 percent, while full-year revenue guidance was lowered to $10.35 billion to $10.5 billion, down 5 to 7 percent.

In a week, permanent chief executive Heidi O’Neill will take over from interim co-chief executives Meghan Frank and André Maestrini, who have led the company since Calvin McDonald’s departure in January. The business she inherits is not yet in safe waters.