Results at a glance
- Period
- FY2026Q2
- Revenue
- $2.4B (2,416 MUSD)
- Net income
- $329.0M (329 MUSD)
- Net margin
- 13.6%
From the Lululemon Open LedgerView the live ledger
On September 3, 2026, lululemon athletica reported second-quarter fiscal 2026 results for the thirteen weeks ended August 2, 2026: net revenue of $2.416 billion (−4% YoY), comparable sales −9% (Americas −12%), and net income of $329 million (−11%). Gross margin rose 200 basis points to 60.5% — but $134.5 million of IEEPA tariff refunds contributed 560 basis points of that print. Inventories ended at $1.711 billion (−1% dollars, −7% units). The quarter is the first clear revenue contraction for a brand that compounded from $6.3B to $11.1B over FY2021–FY2025 in the public Beancount ledger below.
The Headline Numbers
Lululemon's fiscal year ends on the Saturday closest to January 31. The company labels the year ending January 31, 2027 as "2026" and the year ended February 1, 2026 as "2025." Q2 FY2026 is therefore May 4 through August 2, 2026. Every dollar in the table matches the income-statement fence and the press release / 10-Q package.
| Metric | Q2 FY2026 | Q2 FY2025 | YoY Change |
|---|---|---|---|
| Net revenue | $2,416M | $2,525M | −4% |
| Gross profit | $1,462M | $1,477M | −1% |
| Gross margin | 60.5% | 58.5% | +200 bps |
| Income from operations | $454M | $524M | −13% |
| Operating margin | 18.8% | 20.7% | −190 bps |
| Net income | $329M | $371M | −11% |
| Diluted EPS | $2.92 | $3.10 | −6% |
| Inventories (period-end) | $1,711M | $1,723M | −1% |
Revenue fell four percent while net income fell eleven. Operating margin compressed 190 basis points even after the tariff refunds padded gross profit — SG&A as a percent of sales jumped from 37.7% to 41.7%. The refund is real cash, but it is not demand. Strip the $134.5M cost-of-goods reduction and the associated $4.1M interest, and the quarter's earnings power is weaker still (the company attributes $0.86 of the $2.92 diluted EPS to those items, net of tax).
Revenue Deep Dive
Geographic split from the September 3 release:
| Region | Q2 FY2026 revenue trend | Comparable sales |
|---|---|---|
| Americas | −8% | −12% |
| International | +4% (+2% constant dollar) | −3% (−6% constant dollar) |
| Company | −4% (−5% constant dollar) | −9% (−10% constant dollar) |
The Americas are still the engine, and the engine is in reverse: an eight-point revenue decline with twelve-point negative comps is not a mix story — it is traffic and conversion. International kept absolute revenue positive on store openings and channel expansion, but comps there were also negative. That is the opposite of "market expansion exceeding expectations."
Management signal scan (demand / supply / product). The release and prepared commentary do not carry any of the seven bullish themes (demand exceeding supply, industry upcycle, market expansion ahead of plan, product ramps ahead of forecast, sustained ASP increases, tight supply, or robust demand). What management did say, verbatim:
- Meghan Frank, Interim Co-CEO and CFO: "While we continue to navigate some challenging dynamics, we are taking a prudent approach with our revised full-year outlook. Our teams remain focused on accelerating growth by strengthening our product offerings, increasing our marketing investments, and maintaining disciplined expense management."
- André Maestrini, Interim Co-CEO: "We remain confident in our ability to take the right steps to strengthen our performance and deliver sustainable growth over time… We look forward to welcoming our incoming CEO, Heidi O'Neill, next week as we begin an exciting new chapter for the company."
"Challenging dynamics" and a revised outlook are cycle language in the opposite direction of an upcycle. Product and marketing are framed as work still to do, not as launches already beating plan. The ledger's Income:Revenue line (−2,416 MUSD for the quarter) confirms the miss; nothing in receivables or deferred revenue offsets it with prepaid demand.
The Margin Story
| Period | Revenue (MUSD) | Gross margin | Net margin | Inventories (MUSD) |
|---|---|---|---|---|
| FY2021 | 6,257 | 57.7% | 15.6% | 966 |
| FY2022 | 8,111 | 55.4% | 10.5% | 1,447 |
| FY2023 | 9,619 | 58.3% | 16.1% | 1,324 |
| FY2024 | 10,588 | 59.2% | 17.1% | 1,442 |
| FY2025 | 11,103 | 56.6% | 14.2% | 1,701 |
| Q2 FY2026 | 2,416 | 60.5% | 13.6% | 1,711 |
Annual gross margins are computed from the ledger's Income:Revenue and Expenses:CostOfRevenue (FY2021–FY2025). Q2's 60.5% is the highest print in the table — and the release is explicit about why: "This includes $134.5 million of tariff refunds which increased gross margin by 560 basis points." Ex-refund, Q2 gross margin is roughly 54.9%, below the FY2025 annual average and below the prior-year quarter's 58.5%. That is compression, not pricing power. The release contains no language about sustained increases in selling prices, ASP momentum, or contract pricing moving higher — absence that matches a quarter where units and comps fell while a one-time cost credit held the margin line up.
Inventory is the other half of the margin story. Assets:Current:Inventories sits at 1,711 MUSD on August 2, 2026, essentially flat in dollars versus the year-ago quarter while units are down 7%. A −4% revenue quarter with inventory still near the FY2025 year-end peak (1,701 MUSD) means the stockroom is not yet the relief valve — units are coming down, but the balance-sheet dollars have not. That is the line the multi-year arc below is built to show.
The One Big Question: Can a Growth Brand Survive Its First Negative Comp Cycle?
Revised guidance is the tell. For Q3 FY2026 the company expects net revenue of $2.290–$2.320 billion (−10% to −11%). For the full year, $10.350–$10.500 billion (−5% to −7%), with diluted EPS $9.48–$9.73 including the $0.86 of tariff/interest benefit already booked in Q2 and "does not reflect any further potential tariff refunds."
| Signal | What the release says | What the ledger shows |
|---|---|---|
| Demand | Comps −9%; Americas −12% | Revenue −4% QoQ YoY |
| Margin quality | +200 bp GM, of which +560 bp from refunds | Cost of revenue 954 on 2,416 sales |
| Inventory | −1% dollars / −7% units | Inventories 1,711 MUSD |
| Outlook | FY revenue −5% to −7% | Next print is guided lower still |
| Leadership | Incoming CEO Heidi O'Neill "next week" | Continuity risk on the same chart |
A growth brand's first shrinking quarter is not automatically a thesis break — Nike and others have printed negative comps and recovered. The question specific to this print is whether the gross-margin celebration survives without another tariff refund, and whether inventory dollars follow units down before the holiday half. The ledger makes both checks mechanical: watch Expenses:CostOfRevenue without a one-off credit, and watch Assets:Current:Inventories versus the revenue line.
Tracking a $2.4B quarter in plain text
Modeling the quarter in Beancount clarifies what the press release compresses into percentages: double-entry forces every million to land on a named account, which is how we model every company. Income postings are credits (negative); expenses are debits (positive); Equity:Adjustments absorbs reported net income so the transaction sums to zero.
; Revenue 2416; cost 954; R&D 0; SG&A 1006; otherExp 0; otherInc 11; tax 138; net income 329.
; Check: −2416 + 954 + 0 + 1006 + −11 + 138 + 329 = 0 ✓
2026-08-02 * "lululemon athletica inc." "FY2026Q2 Income Statement"
Income:Revenue -2416 MUSD
Expenses:CostOfRevenue 954 MUSD
Expenses:ResearchAndDevelopment 0 MUSD
Expenses:SellingGeneralAdministrative 1006 MUSD
Income:OtherNet -11 MUSD
Expenses:IncomeTax 138 MUSD
Equity:Adjustments 329 MUSD ; net income offset (RE set by balance assertion)The balance-sheet number that carries the narrative is inventory. At fiscal year-end 2021 it was 966 MUSD; by FY2025 it was 1,701 MUSD; at Q2 FY2026 it is 1,711 MUSD — almost 1.8× the FY2021 stockroom against a company that just guided a mid-single-digit revenue decline for the year.
The Multi-Year Arc
| Period | Revenue | Net income | Net margin | Inventories |
|---|---|---|---|---|
| FY2021 | $6,257M | $975M | 15.6% | $966M |
| FY2022 | $8,111M | $855M | 10.5% | $1,447M |
| FY2023 | $9,619M | $1,550M | 16.1% | $1,324M |
| FY2024 | $10,588M | $1,815M | 17.1% | $1,442M |
| FY2025 | $11,103M | $1,579M | 14.2% | $1,701M |
| Q2 FY2026 | $2,416M | $329M | 13.6% | $1,711M |
From FY2021 to FY2025 revenue nearly doubled while inventory rose about 76%. FY2025 already showed the first annual net-income step-down (−13% vs FY2024) even before this quarter's top-line contraction. Q2 extends that pattern into negative comps: the compounding story is intact in the five-year revenue column and broken in the last two earnings columns. Inventory did not mean-revert with the FY2023 cleanup (1,324 MUSD); it climbed again into the slowdown.
The Verdict: Bull vs. Bear
Bull Case
- International revenue still grew 4% in a down quarter; store count ended at 825 (+9 net in the quarter), so physical distribution is still expanding.
- Unit inventories −7% while dollar inventories were roughly flat — working-capital discipline may be starting even if the balance-sheet dollars have not yet followed.
- The brand still prints mid-to-high-50s gross margins on an ex-refund basis historically; the tariff credit does not invent a franchise that was not already high-margin.
- $1.390 billion of cash and $594 million of undrawn revolver capacity fund the CEO transition without balance-sheet stress.
- A new CEO with a clean mandate can re-cut product and marketing; the release's own words put that handoff one week out.
Bear Case
- None of the seven management-demand signals appear in the release; the −9% comps (Americas −12%) are unsupported by "robust demand," "demand exceeding supply," or "product ramps ahead of plan" language — the Bear Case starts from that absence.
- Ex-tariff Q2 gross margin is weaker than the prior-year quarter; the 60.5% headline is not pricing power.
- Inventories at 1,711 MUSD remain near the cycle high while revenue and guidance are falling — the stockroom has not yet de-risked the P&L.
- Q3 guided −10% to −11% revenue is a deeper cut than Q2's −4%, so the trough is not behind the print.
- FY2026 EPS guidance embeds $0.86 of already-recognized tariff/interest benefit and explicitly excludes further refunds — the run-rate bar is lower than the guided range implies.
Our Take
This is the first quarter where Lululemon's public ledger shows a growth brand managing a demand miss rather than a supply constraint. The tariff refund bought a clean gross-margin print; the guidance and the comps say the underlying merchandise engine is still slowing. Until Assets:Current:Inventories rolls over in dollars and Income:Revenue stabilizes without another cost credit, treat the 60.5% margin as a one-time gift, not a turn.
