lululemon athletica Inc. LULU is likely to witness top- and bottom-line declines when it reports second-quarter fiscal 2026 results on Sept. 3, after market close. The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $2.5 billion, indicating 2.3% growth from the year-ago quarter's reported figure.
The consensus estimate for the company's fiscal second-quarter earnings is pegged at $1.79 per share, suggesting a 42.3% decline from the year-ago quarter’s actual. Earnings estimates have been unchanged in the past 30 days.
The Vancouver-based company has been reporting steady earnings outcomes, as evident from its bottom-line surprise trends in the past several quarters. lululemon has a trailing four-quarter earnings surprise of 8.1%, on average. Given its positive record, the question is, can LULU maintain the momentum?
lululemon athletica inc. Price and EPS Surprise
lululemon athletica inc. price-eps-surprise | lululemon athletica inc. Quote
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for LULU this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
lululemon has an Earnings ESP of 0.00% and a Zacks Rank #3.
Key Insights on Trends to Define LULU’s Q2 Results
lululemon continues to benefit from the progress in its Power of Three X2 growth strategy. The plan focuses on three key growth drivers — product innovation, guest experience and market expansion. LULU is expected to deliver solid revenue growth in the fiscal second quarter through product innovation, enhanced guest experience and aggressive international expansion under the plan.
International markets, led by Mainland China, have been posting outsized growth, while the men’s category has been gaining share. Digital investments have been strengthening the omnichannel ecosystem and disciplined store expansion has been supporting brand visibility. On the last reported quarter’s earnings call, the company noted that trends in Mainland China have been strong in the second quarter of fiscal 2026.
For second-quarter fiscal 2026, management guided China Mainland to see mid- to high-teens growth and Rest of World to record high-single to low-double-digit growth. This keeps international expansion as the primary offset to a weaker Americas demand backdrop. Our model anticipates revenues in China Mainland to increase 19.5% and Rest of World to grow 14.6% in second-quarter fiscal 2026.
However, LULU faces near-term pressure from soft North America demand and significant margin contraction. Higher markdowns, tariff-related costs and elevated SG&A expenses weighed on profitability, while cautious guidance signals slower growth and continued operating margin pressure.
North America, lululemon’s largest and most mature market, has been witnessing softness due to uneven traffic trends and increasingly cautious consumer spending, particularly in discretionary categories. The impact has been most visible in the women’s category, a core driver of the brand’s North American business. Slower momentum in North America limits consolidated growth and raises concerns about market saturation. Increased promotional activity across the broader apparel space has also intensified competition, making it harder to drive full-price sales. Until demand stabilizes and traffic improves, North America is likely to remain a drag on near-term revenue growth.
On the last reported quarter’s earnings call, management cited a recent moderation in sales trends tied to spikes of negative brand commentary and product launches that have not met expectations, and noted it is moving with urgency to adjust product and increase marketing and community activations.
Management’s near-term outlook points to a tougher demand and margin setup in the fiscal second quarter. Management reduced its outlook after sales trends moderated exiting first-quarter fiscal 2026. For second-quarter fiscal 2026, it expects revenues of $2.45-$2.475 billion, suggesting a 2-3% fall, and EPS of $1.76-$1.81, whereas it registered EPS of $3.10 in the year-ago quarter.
lululemon’s margins are expected to remain under pressure in the to-be-reported quarter due to higher product costs, increased markdowns, unfavorable channel mix and tariff pressures. For second-quarter fiscal 2026, management expects the gross margin to move down 410 bps, led by higher tariff costs and ongoing investments in store openings, optimizations and the distribution network. Tariffs are expected to be a 150-bps headwind, with offsets of 100 bps. Meanwhile, markdowns are likely to rise 50 bps due to additional seasonal clearance.
For second-quarter fiscal 2026, management expects SG&A deleverage of 500 bps, driven by lower sales versus prior expectations, proxy costs, increased marketing and the reintroduction of expenses reduced last year, including store labor hours. LULU expects the second-quarter fiscal 2026 operating margin to contract 910 bps year over year to 11.6%.
LULU’s Price Performance & Valuation
lululemon’s shares have exhibited a downtrend in the past three months, losing 11.4% against the industry’s growth of 2.2%. The company has also underperformed the Zacks Consumer Discretionary sector and the S&P 500’s growth of 2% and 0.5%, respectively.
lululemon’s 3-Month Performance
Image Source: Zacks Investment Research
From the valuation standpoint, the company trades at a forward 12-month P/E multiple of 10.33X, below the industry average of 15.05X.
Image Source: Zacks Investment Research
Stocks With Favorable Combination
Here are some companies, which, according to our model, have the right combination of elements to post an earnings beat this season:
Victoria's Secret VSXY has an Earnings ESP of +5.20% and currently sports a Zacks Rank of 1. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2026 results. The consensus mark for VSXY’s quarterly revenues is pegged at $1.6 billion, which indicates an 11.2% rise from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for VXSY’s quarterly earnings has moved up by a penny in the past 30 days to 77 cents per share. The consensus estimate indicates a significant 133% rise from the year-ago quarter’s actual. VSXY has an average trailing four-quarter earnings surprise of 81.9%.
Macy's Inc. M currently has an Earnings ESP of +20.81% and a Zacks Rank of 2. The company is likely to register growth in the top line when it reports second-quarter fiscal 2026 results. The consensus mark for M’s quarterly revenues is pegged at $4.8 billion, which indicates a 0.2% rise from the figure reported in the prior-year quarter.
The consensus mark for Macy's quarterly earnings has moved up 5.7% in the past 30 days to 37 cents per share. However, the consensus estimate indicates a decline of 9.8% from the year-ago quarter’s actual. M has an average trailing four-quarter earnings surprise of 211%.
NIKE Inc. NKE currently has an Earnings ESP of +0.55% and a Zacks Rank of 3. NIKE is likely to register top- and bottom-line declines when it reports first-quarter fiscal 2027 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $11.5 billion, which indicates a 2.2% decline from the prior-year quarter’s actual.
The consensus estimate for earnings has moved up by a penny in the past 30 days to 44 cents per share, which implies a 10.2% decline from the year-ago quarter's actual. NKE has an average trailing four-quarter earnings surprise of 56.8%.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
lululemon athletica inc. (LULU): Free Stock Analysis Report
NIKE, Inc. (NKE): Free Stock Analysis Report
Macy's, Inc. (M): Free Stock Analysis Report
Victoria's Secret & Co. (VSXY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).