Lululemon delivered a fourth-quarter earnings beat on Tuesday but gave investors exactly what they were afraid of: a full-year 2026 outlook that fell well short of expectations on both the top and bottom lines. The stock fell roughly 1% in after-hours trading on the results, extending a year-to-date decline that has already seen shares lose more than 23% and trade close to a six-year low.
The quarterly numbers themselves were fine. Revenue came in at $3.64 billion against an estimate of $3.58 billion, while adjusted earnings per share of $5.01 beat the $4.78 consensus. Comparable sales rose 3%, though the composition of that number told a troubling story. International comparable sales jumped 20%, with China Mainland leading the way, while Americas comparable sales fell 1%, continuing a pattern of domestic stagnation that has persisted for roughly two years.
The guidance is where the anxiety crystallized. For fiscal 2026, the company projects revenue of $11.35 billion to $11.50 billion, implying growth of just 2% to 4%, a modest expansion for a brand that once routinely grew at double-digit rates. Full-year adjusted earnings per share guidance of $12.10 to $12.30 came in below the $12.58 analyst consensus. For the current first quarter specifically, revenue guidance of $2.40 billion to $2.43 billion was meaningfully short of the $2.47 billion estimate.
The root cause is a combination of factors that have been building for more than a year. Product execution in North America has stumbled, with the company acknowledging that its recent assortments have been too predictable and insufficiently differentiated to drive full-price selling. The shift toward promotions and discounting that Lululemon leaned on to move inventory has damaged brand perception in a market where premium pricing is the core value proposition.
Tariff headwinds are adding a structural cost dimension. The company expects $380 million in gross tariff costs in 2026, up from $275 million in 2025, with only $160 million in offsets. That $220 million net impact represents a meaningful drag on margins and limits management’s ability to invest in the product and marketing reset the brand urgently needs.
A proxy battle with founder Chip Wilson adds political complexity at a moment when the company can least afford internal distraction. Wilson, one of the largest shareholders, has been publicly critical of the board’s governance and product strategy for months. His latest statement called the results a moment when shareholders would be “critically evaluating” any claims of progress. Lululemon attempted to partially defuse the situation by adding Chip Bergh, former CEO of Levi Strauss, to its board, a choice that was not among Wilson’s candidates but carries credibility given Bergh’s track record of steering a legacy brand toward profitable direct selling.
Interim co-CEO Meghan Frank framed improving full-price sales in North America as the company’s paramount priority for the year. Management said they expect positive year-over-year growth in full-price selling to begin in the second quarter, supported by new product launches across multiple categories. Whether that inflection arrives on schedule will be one of the most closely watched narratives in retail for the remainder of 2026.
Wells Fargo lowered its price target to $150 following the report, while Telsey Advisory Group also trimmed its estimate and moved to market perform. Multiple other analysts have cut targets in recent weeks, intensifying near-term selling pressure on a stock that has already been one of the sector’s biggest laggards.