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    LULU
    Earnings call· May 2026(Q1 FY27)

    lululemon athletica Q1 FY27 earnings call LULU

    Jun 4, 2026 Source

    Executive summary

    lululemon Q1 FY27 – North America Weakness & Revised Outlook

    Lululemon's Q1 FY27 performance was impacted by moderating sales trends in North America, driven by negative brand commentary and underperforming product launches, leading to a downward revision of full-year revenue and EPS guidance. Despite these headwinds, international markets, particularly China, demonstrated strong growth. The company is actively implementing strategies to regain momentum, including increased marketing investments, product innovation, and efficiency initiatives, while preparing for a new CEO transition.

    Highlights

    5

    • China Mainland revenue increased 30% (23% constant currency) in Q1 FY27, with comparable sales up 13%.

    • Global full price sales increased high single-digits in Q1 FY27, with meaningful sequential improvement in the U.S.

    • Inventory units decreased approximately 4% YoY at the end of Q1 FY27, enabling faster response to demand.

    • Product development process reduced from 18-24 months to 15-16 months, with a target of 12-14 months.

    • The company is chasing 20% more volume this year to react quickly to strong-performing styles.

    Concerns

    5

    • Total net revenue rose only 4% (2% constant currency) in Q1 FY27, below expectations.

    • North America revenue decreased 3% (4% constant currency) in Q1 FY27, with comparable sales down 6%.

    • Full-year FY27 revenue guidance lowered to $11B-$11.15B (flat to down 1% YoY) from prior expectations.

    • Full-year FY27 diluted EPS guidance lowered to $10.95-$11.15, compared to $13.26 in FY26.

    • Gross margin decreased 410 basis points in Q1 FY27, primarily due to a 330 bps decline in product margin, with tariffs contributing 280 bps.

    Guidance & targets

    26
    CategoryTargetConfidence
    Q2 FY27 Revenue
    $2.45B-$2.475B
    high materiality
    High
    Q2 FY27 North America Revenue Growth
    decline in the low double digits
    medium materiality
    High
    Q2 FY27 US Revenue Growth
    decline in the low double digits
    medium materiality
    High
    Q2 FY27 China Mainland Revenue Growth
    increase in the mid- to high teens
    medium materiality
    High
    Q2 FY27 Rest of World Revenue Growth
    increase in the high single to low double digits
    medium materiality
    High
    Q2 FY27 Gross Margin
    decrease approximately 410 basis points
    high materiality
    High
    Q2 FY27 SG&A Rate
    deleverage by 500 basis points
    medium materiality
    High
    Q2 FY27 Operating Margin
    approximately 11.6%
    high materiality
    High
    Q2 FY27 Diluted EPS
    $1.76-$1.81
    high materiality
    High
    Q2 FY27 Effective Tax Rate
    approximately 30%
    low materiality
    High
    Full-Year FY27 Revenue
    $11B-$11.15B
    high materiality
    High
    Full-Year FY27 North America Revenue Growth
    down in the high single digits
    medium materiality
    High
    Full-Year FY27 US Revenue Growth
    slightly lower than North America
    medium materiality
    High
    Full-Year FY27 Canada Revenue Growth
    better than US
    medium materiality
    High
    Full-Year FY27 China Mainland Revenue Growth
    up approximately 20%
    medium materiality
    High
    Full-Year FY27 Rest of World Revenue Growth
    increase in the mid-teens
    medium materiality
    High
    Full-Year FY27 Net New Company-Operated Stores
    closer to the low end of the 40 to 45 range
    medium materiality
    High
    Full-Year FY27 Gross Margin
    decrease approximately 90 basis points
    high materiality
    High
    Full-Year FY27 Markdowns
    flat to slightly improved
    medium materiality
    High
    Full-Year FY27 SG&A Deleverage
    approximately 290 basis points
    medium materiality
    High
    Full-Year FY27 Operating Margin
    decrease by approximately 380 basis points
    high materiality
    High
    Full-Year FY27 Effective Tax Rate
    approximately 30%
    low materiality
    High
    Full-Year FY27 Diluted EPS
    $10.95-$11.15
    high materiality
    High
    Full-Year FY27 Inventory Dollar Growth
    low to mid-single-digit range
    medium materiality
    High
    Full-Year FY27 Inventory Unit Growth
    slightly down
    medium materiality
    High
    Full-Year FY27 Capital Expenditures
    $700M-$720M
    medium materiality
    High

    Segment performance

    10
    SegmentRevenueYoYQoQMargin
    North America
    Experienced a decline in revenue and comparable sales, contributing to overall top-line weakness.
    Constant Currency Growth: -4%Comparable Sales Growth: -6%
    		—-3%——
    Canada
    Revenue decreased in Q1 FY27.
    Constant Currency Growth: -6%
    		—-3%——
    U.S.
    Revenue decreased in Q1 FY27.
    		—-4%——
    China Mainland
    Strong start to the year, supported by successful product and brand activations, despite a slowing of momentum towards the end of Q1 due to negative commentary.
    Constant Currency Growth: 23%Comparable Sales Growth: 13%Chinese New Year Shift Contribution: 8 percentage points to growth rate
    		—30%——
    Rest of World
    Pleased with business in APAC and EMEA, despite some disruption in Middle East franchise business and softer tourism in Europe and Japan.
    Constant Currency Growth: 9%Comparable Sales Growth: 1%
    		—13%——
    Store Channel
    Total sales increased, driven by store expansion and optimizations.
    Total Stores: 816Square Footage Growth: 11% YoYNet New Stores Opened: 5Optimizations Completed: 6
    		—3%——
    Digital Channel
    Revenues increased and continued to be a significant contributor to total revenue.
    Contribution to Total Revenue: 40%
    		$1B4%——
    Men's Category
    Revenue increased versus last year.
    		—7%——
    Women's Category
    Revenue increased versus last year.
    		—4%——
    Accessories and Other
    Revenue declined versus last year.
    		—-1%——

    Operational metrics

    13
    Gross Profit
    $1.34B
    Q1 FY27

    Compared to 58.3% in Q1 FY26.

    SG&A Expenses
    $1.06B
    Q1 FY27

    Compared to 39.8% of net revenue in Q1 FY26.

    Operating Income
    $277M
    Q1 FY27

    Compared to 18.5% of net revenue in Q1 FY26.

    Tax Expense
    $91M
    Q1 FY27

    Compared to 30.2% a year ago, due to lower stock-based compensation deductions.

    Net Income
    $195M
    Q1 FY27

    Compared to $2.60 diluted EPS in Q1 FY26.

    Capital Expenditures
    $127M
    Q1 FY27

    Compared to $152M in Q1 FY26. Primarily for business growth, distribution center, new stores, relocations, renovations, and technology.

    Cash and Cash Equivalents
    $1.5B
    End of Q1 FY27

    Balance at the end of the first fiscal quarter.

    Revolving Credit Facility Capacity
    Nearly $600M
    End of Q1 FY27

    Available capacity under the revolving credit facility.

    Shares Repurchased
    2.2M
    Q1 FY27

    Shares repurchased during the first fiscal quarter.

    Remaining Share Repurchase Authorization
    $1B
    Current

    Remaining authorization on the share repurchase program.

    Product Development Process Time
    15-16 monthsReduced from 18-24 months
    Current

    Efforts to improve speed to market.

    Chase Volume
    20%more than last year
    FY27

    Increased volume being chased to react to guest demand trends.

    Marketing Spend
    6%-6.5%10-15% above last year
    FY27

    Increased marketing investment to drive brand heat, compared to 5.6% of sales last year.

    Industry KPIs

    11
    MetricValueDetails
    China trajectory30%%
    Effective tax rate31.8%%
    Inventory position$1.7BUSD
    Revenue by channel—
    Gross margin bridge-410bps
    Revenue by geography—
    Operating margin sg a—
    Store fleet door investment816stores
    Share buyback capital return$1BUSD
    Tariff cost exposure recovery—
    Franchise product cycle performance—

    Product announcements

    8
    ProductTypeDetails
    Run Franchises (Fast & Free, Swiftly, Metal Vent)update
    Daydrift and Defineupdate
    New Look of Yoga Campaign (Align and Groove franchises)launch
    Warm Weather Styleslaunch
    Outerwear and Loungeroadmap
    SeaWheeze Half Marathonmilestone
    Yoga Summer Serieslaunch
    Summer Sweat Gamesmilestone

    Deals & partnerships

    2
    Franchise partnerstore opening

    Opened the first lululemon location in Greece.

    Franchise partnerstore opening

    Plans are well underway to open in India later this year.

    Risks & headwinds

    7
    Negative Brand CommentaryLate Q1 FY27 and early Q2 FY27

    Spikes in negative commentary in media and social channels, impacting traffic and top-line performance.

    Mitigation: Increased marketing investment and brand activations to shift narrative and drive brand heat.

    Underperforming Product LaunchesQ2 FY27 start

    Some product launches (e.g., 'new look of yoga' campaign) did not meet expectations, failing to generate anticipated halo effect.

    Mitigation: Leaning into chase capabilities for strong-performing styles, reducing product development time, and focusing on product quality and activation.

    Increased TariffsQ1 FY27, Q2 FY27, Full-Year FY27

    Gross negative impact of 280 bps on gross margin in Q1 FY27; expected 150 bps in Q2 FY27. Full-year FY27 gross impact of 30 bps, with almost all offset. Q2 FY27 assumes 10% incremental rate, H2 FY27 assumes 20%.

    Mitigation: Enterprise efficiency initiatives (offsetting 100 bps in Q1 and Q2). Guidance assumes no recovery of tariffs paid under IEEPA.

    Fixed Cost DeleverageQ1 FY27

    140 bps impact on gross margin in Q1 FY27.

    Mitigation: Ongoing investments in store fleet and regional mix, with enterprise efficiency initiatives aiming to improve overall cost structure.

    Increased SG&A ExpensesQ1 FY27, Q2 FY27, Full-Year FY27

    310 bps increase in Q1 FY27, 500 bps deleverage expected in Q2 FY27, and 290 bps deleverage expected for FY27.

    Mitigation: Strategic investments in growth initiatives, IT infrastructure, market expansion, and brand awareness. Efforts to realize significant savings from enterprise enablement pillar.

    Middle East DisruptionQ1 FY27

    Disruption in franchise business.

    Mitigation: Viewed as temporary; continued focus on brand potential in APAC and EMEA.

    Softer TourismQ1 FY27

    Softer tourism in Europe and Japan.

    Mitigation: Viewed as temporary; continued focus on brand potential in APAC and EMEA.

    Q&A highlights

    7

    How much of the top-line weakness is due to fashion shifts vs. Lululemon's strategy? What is the new item penetration, and how will margins stabilize, particularly regarding clearance?

    Meghan Frank stated that weakness stems from negative brand commentary and underperforming product launches, not broader market shifts. Newness is about 30% of the assortment. Q2 markdowns are expected to be up 50 bps, with sequential improvement in the second half, leading to flat to modest improvement for the full year.

    “we're expecting a modest -- flat to modest improvement in markdowns for the full year. So we're having a bigger impact in spring/summer clearance in Q2 with an expectation of markdowns up 50 basis points, and then some recovery as we move into the second half.”

    asked by Dana Telsey · answered by Meghan Frank

    2 min read5 chapters

    Detailed Narrative

    01

    North America Performance and Strategic Adjustments

    North America experienced a sequential improvement in full-price sales in Q1 FY27, but overall sales trends moderated in late Q1 and early Q2. This was attributed to negative brand commentary and some product launches not meeting expectations. In response, the company is implementing in-store strategies including a 15% reduction in SKUs for a less dense presentation, sharper merchandising focusing on performance and lifestyle products, and a significant reduction in markdowns to enhance the premium shopping experience. Initial responses to these initiatives are positive, with high single-digit regular price sales growth globally in Q1.

    02

    Product Innovation and Speed to Market Initiatives

    Lululemon is focused on elevating product design, increasing innovation flow, and improving speed to market. The product development process has been reduced from 18-24 months to 15-16 months, with a goal to further shorten it to 12-14 months. The company is also leveraging its 'chase capabilities' by reordering 20% more volume this year compared to last, allowing for quicker replenishment of strong-performing styles like the Groove pant and Define. While some recent product launches underperformed, the overall product pipeline, including new lounge fabrics and warm weather assortments, remains exciting.

    03

    Enhanced Brand Activation and Marketing Investment

    To shift the narrative and drive brand heat, lululemon is increasing its marketing investment by approximately 10-15% over last year, bringing it to 6-6.5% of sales for FY27. This increased spend will fund various brand activations globally, including a yoga experience on the Great Wall of China, the return of the SeaWheeze Half Marathon in Vancouver, a pinnacle yoga event in New York City, and the sixth annual Summer Sweat Games in China. These efforts aim to deepen engagement with guests through community experiences, collaborations, and an innovative media strategy.

    04

    International Market Resilience and Expansion

    China Mainland demonstrated strong performance in Q1 FY27 with revenue growth of 30% (23% constant currency) and comparable sales up 13%, despite a temporary slowdown due to negative commentary. The company expects China to maintain approximately 20% growth for the full year. The Rest of World segment also saw revenue increase by 13% (9% constant currency). Lululemon is continuing its international expansion, having recently opened its first location in Greece with a franchise partner and planning to open in India later this year, reinforcing its global growth engine.

    05

    Enterprise Efficiency and Leadership Transition

    Lululemon is advancing its enterprise enablement pillar, focusing on operational efficiency through global supply chain optimization, indirect spend reduction via procurement, and the implementation of AI-powered systems and automation. These initiatives are expected to yield benefits over time⏳. The company also announced the upcoming arrival of Heidi O'Neill as CEO in September, with current interim co-CEOs Meghan Frank and Andre Maestrini focused on setting the business up for a smooth transition and continued momentum.

    AI-generated summary of the company’s earnings call. Not investment advice.