Lululemon Q3 Revenue Guide Implies Steeper Fall Than 4.3% Drop

Lululemon Athletica management guided third-quarter fiscal 2026 revenue to a range of $2.29 billion to $2.32 billion, a steeper decline than the 4.3% year-over-year drop recorded in the quarter ending August 2, 2026. The company expects earnings for the period of $0.93 to $0.98 per share, down from $2.59 in the same quarter a year earlier. Lululemon’s next report is expected on or around December 9, 2026.

The stock has lost 44.6% over the past year, trailing the 17.3% return of the S&P 500. On September 3, management lowered its full-year revenue forecast and described the new outlook as prudent. The full-year earnings forecast was cut to $9.61 per share at the midpoint from $11.05, a figure that includes $0.86 per share from tariff refunds.

In the latest quarter, net income fell to $329 million from $371 million a year earlier. Operating margin was 18.8%, down from 20.7%, but included 5.6 percentage points from one-time tariff refunds of about $97 million after tax. Excluding those refunds, the margin was approximately 13.2%. If the latest quarter repeated four times without the one-time items, annual net income would be about $0.93 billion, compared with $1.42 billion over the past twelve months.

At the October 14 close, Lululemon traded at 7.5 times its trailing twelve-month earnings, which include the tariff refunds. Based on the latest quarter multiplied by four and excluding the refund, the valuation is about 11.5 times earnings.

The company holds no bank or bond borrowings as of August 2, 2026, and reported $1.39 billion in cash and cash equivalents. Its primary obligations are $2.14 billion in lease liabilities. Free cash flow over the past twelve months was $1.35 billion, equivalent to roughly 63% of total lease liabilities.

Cash generation increased despite lower sales; free cash flow in the latest quarter reached $225 million, up from $151 million a year earlier. Lululemon spent $1.16 billion buying back shares over the past twelve months, equal to 10.8% of its market value. Management stated on September 3 that it expects 2026 repurchases to match 2025 levels.

The company plans to address slower growth by strengthening product offerings and increasing marketing spend. Lululemon stock previously lost 34% during the 2022 inflation shock, compared with a 25% decline for the S&P 500.