Lululemon reports drop in sales and revenue in second quarter, revises outlook

A woman walks past a Lululemon Athletica Inc. store in Beijing, China. Photo by WANG Zhao/AFP via Getty Images files

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Lululemon Athletica Inc. reported a tough second quarter on Thursday as revenue, profits and comparable sales all declined year over year.

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“While we continue to navigate some challenging dynamics, we are taking a prudent approach with our revised full-year outlook,” the company’s interim co-chief executive and chief financial officer Meghan Frank said in a press release. “Our teams remain focused on accelerating growth by strengthening our product offerings, increasing our marketing investments, and maintaining disciplined expense management.”

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The Vancouver-based athletic apparel retailer reported a four per cent drop in year-over-year net revenue to US$2.4 billion, in line with analysts’ forecasts.

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Net income was US$329 million, up from US$195 million in the first quarter but down from US$370 million a year ago. Diluted earnings per share were US$2.92, down from US$3.10 per share last year but overshooting analysts’ expectations of US$1.79 per share.

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Lululemon reported a nine per cent dip in comparable sales, a metric that includes net revenue from online sales and established stores that have been open for at least 12 months. The Americas region led the decline with a 12 per cent drop, while international comparable sales fell three per cent.

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The latest results mark the last full quarter before Heidi O’Neill, a former executive at Nike Inc., takes over as Lululemon’s new chief executive on Sept. 8.

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Frank and chief commercial officer André Maestrini have co-led the business since former CEO Calvin McDonald stepped down on Jan. 31. In a press release, Maestrini said Lululemon looks forward to welcoming O’Neill “as we begin an exciting new chapter for the company.”

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The retailer has faced a number of challenges over the last year, including U.S. tariffs and the end of the de minimis duty-free shipping loophole; a high-profile proxy fight with its founder, Chip Wilson, which settled in May, and slowing sales in its home North American market.

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Lululemon’s second quarter sales were down in the Americas, where net revenue declined eight per cent to US$1.6 billion. In North America, where it generates most of its sales, net revenue was down 11 per cent in Canada and eight per cent in the United States.

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In mainland China, a key growth market for the company, net revenue grew four per cent to US$407 million. The region now accounts for 17 per cent of the brand’s sales, ticking up from 16 per cent in the same quarter last year.

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Net revenue in the rest of the world was up five per cent to nearly US$392 million.

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Lululemon Athletica Inc. reported a tough second quarter on Thursday as revenue, profits and comparable sales all declined year over year.

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“While we continue to navigate some challenging dynamics, we are taking a prudent approach with our revised full-year outlook,” the company’s interim co-chief executive and chief financial officer Meghan Frank said in a press release. “Our teams remain focused on accelerating growth by strengthening our product offerings, increasing our marketing investments, and maintaining disciplined expense management.”