What Wall Street Wants to Hear From Lululemon Tonight

Lululemon just reported earnings, with shares initially down 15% following the report. Here are the key numbers:

• Revenue: $2.416B vs. $2.46B expected
• Adjusted EPS: $2.92 vs. $1.80 expected

Quick Read:

Lululemon delivered a massive EPS beat, but revenue missed expectations as sales fell 4% year over year.

The 15% sell-off despite the earnings beat suggests investors are far more concerned about weakening sales and the company’s turnaround trajectory than near-term profitability.

Bull Case: Why a Beat Could Reset the Narrative

• China and international momentum: Q1 FY2026 China mainland revenue rose 30%, with full-year China guidance intact at approximately 20% growth.
• Low expectations: Consensus EPS sits at just $1.79 after 16 downward revisions in 30 days, and shares trade at a 10 P/E.
• Crowd conviction: Polymarket puts beat odds at 0.91, and insiders are net buying.

Bear Case: Why Confidence May Stay Broken

• North America still deteriorating: Q2 guidance calls for U.S. revenue to decline in the low double digits.
• Margin collapse: Q2 gross margin is guided down approximately 410 basis points; operating margin drops to 11.6%.
• Post-beat selling pattern: Beats averaged a -5.89 earnings-day reaction.
• YTD damage: Shares are down 42.22% YTD, leaving little room for a guidance cut before Heidi O’Neill arrives.

Lululemon is expected to report earnings at 4:05 PM ET, and the biggest question is whether its struggling North American business is stabilizing.

Management previously guided to low-double-digit declines in North American full-price sales, while tariffs and markdowns are expected to pressure gross margin by roughly 410 basis points this quarter.

The report also comes during a major leadership transition. Interim co-CEOs are preparing to hand control to incoming CEO Heidi O’Neill this month, putting even more attention on management’s outlook and commentary.

Lululemon now trades around 10 times earnings, reflecting how far investor confidence has fallen. An earnings beat paired with signs of stabilization in North America could begin resetting the narrative. Another guidance cut would deepen the company’s credibility problem heading into its new CEO era.