Lululemon Shares Drop After Weak Sales in China and North America
Lululemon shares fell nearly 17% following a disappointing earnings report marked by weaker-than-expected sales, particularly in its key markets of China and North America. The athletic apparel company reported second-quarter revenue of $2.4 billion, below the estimated $2.46 billion, with comparable store sales declining 9%. Gross margin improved due to tariff refunds but was offset by a drop in operating income year-over-year. Lululemon also cut its full-year guidance for both revenue and earnings per share (EPS), citing ongoing challenges in key regions. The company attributed China's weak performance—8% decline in comparable sales—to reduced foot traffic linked to social media backlash over the Great Wall marketing campaign, as well as a lackluster Tmall 618 event. North America also underperformed with a 12% drop in comps and a significant decline in leggings sales due to shifting consumer preferences toward non-legging styles. Bank of America downgraded its price target for Lululemon from $140 to $122, citing uncertainty around an inflection point. The bank also highlighted that the incoming CEO Heidi O'Neill may signal strategic changes during her first earnings call.
