Lululemon Cuts Guidance, Shares Drop 18%
Lululemon Athletica Inc. (NASDAQ:LULU) cut its full-year guidance for the second time in 2026 and saw shares fall nearly 18% as a result. Despite beating EPS estimates due to an $0.86 per share tariff refund, revenue declined by 4%, with comparable sales dropping 9%. The company cited weakening brand sentiment, traffic declines, and slower-than-expected leggings sales in its two largest markets—the U.S. and China. Lululemon's third-quarter guidance also calls for a further decline of 10% to 11% in revenue. However, the firm maintains strong financial health with $1.4 billion in cash on hand, no debt, and robust first-half operating cash flow of $589 million. The stock has fallen over 50% year-to-date but is now trading at a historically low valuation. Investor sentiment appears to be deteriorating as hedge fund ownership dropped from 61 funds at the end of Q1 2026 to 51 by the end of Q2, and short interest stood at nearly 10% of float. While concerns remain about traffic and product performance, Lululemon's strong balance sheet may provide a buffer during this period.
Tickers: $LULU
Topics: guidance_cut revenue_decline stock_selloff valuation