Lululemon Q2 2027: A 63% Earnings Beat Built on a Tariff Refund
As seen on the 24/7 Wall St. homepage on September 3, 2026.
Strip out the $0.86 per share IEEPA tariff refund and the 63% earnings beat mostly disappears, while revenue missed expectations and comparable sales fell 9% globally. Management cut full-year revenue guidance to $10.35 billion to $10.50 billion, a 5% to 7% decline, with Q3 guided to a further 10% to 11% drop. Incoming CEO Heidi O'Neill starts next week into that.
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Lululemon's $2.92 in diluted EPS beat the $1.79 consensus, but $0.86 of it came from a one-time IEEPA tariff refund. Strip that out and the underlying business performed close to, or below, what analysts expected.
Revenue of $2.42 billion came in missing expectations and fell 4.3% year over year, with global comparable sales down 9%. The Americas took the worst of it, while China and the Rest of World segment grew.
Gross margin expanded 200 basis points to 60.5%, but 560 of those basis points came from the tariff refund, meaning underlying product margin contracted. Operating income fell 13.39% year over year as SG&A climbed as a share of net revenue, a cost structure growing faster than sales.
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Management cut guidance sharply, now expecting a full-year 2026 revenue decline of 5% to 7% and a further 10% to 11% contraction in Q3. The full-year EPS outlook still includes the $0.86 tariff benefit already booked, and excludes future unknown tariff impacts.
Incoming CEO Heidi O'Neill takes over next week at a company with declining comparable sales across every major region, a lowered multi-quarter outlook, and an earnings quality question analysts are unlikely to ignore. Buybacks and cash and equivalents of $1.39 billion give her some financial flexibility as she begins her tenure.
Mentioned: LULU