Thursday, athletic apparel and accessories maker Lululemon Athletica Inc. (LULU, LLL.TO) reported a decline in second-quarter profit, reflecting higher costs and expenses, despite a 14% increase in revenues, which came in above analysts' expectations. The company also provided earnings guidance for the third quarter, which is in line with analysts' forecasts and projected revenue view above consensus. The Vancouver, Canada-based company's net income for the quarter declined to $9.24 million or $0.13 per share from $11.15 million or $0.16 per share in the previous year.
On average, 10 analysts polled by Thomson Reuters expected the company to report earnings of $0.10 per share for the quarter. Analysts' estimates typically exclude special items.
During its first quarter, the company had reported net income of $6.5 million or $0.09 per share, down from $8.5 million or $0.12 per share in the corresponding quarter last year. Net revenues for the recent quarter grew 14% to $97.72 million from $85.48 million in the same quarter last year, helped by innovative product offerings and effective market strategy, the company said. Nine Street analysts had a consensus revenue estimate of $88.2 million for the quarter.
Net revenue from corporate-owned stores increased 9% to $85.1 million from $78.3 million last year, with 2% decline in comparable-store sales on a constant-dollar basis. The company had reported first-quarter net revenues of $81.7 million, an increase of 6%, from $77 million in the same period last year. Income from operations for the second quarter was $14.33 million, compared to an income of $15.54 million in the prior year quarter.
Costs of goods sold advanced to $52.56 million from $41.11 million in the prior-year quarter. Selling, general and administrative expenses increased to $30.83 million from $28.83 million in the comparable quarter a year ago.
Christine Day, Lululemon's chief executive officer said, "We were also able to improve our gross margin sequentially over the first quarter. This rebound was a result of better same-store sales, our enhanced systems, and an operating model that is allowing us to operate with leaner inventory and therefore gain market share without resorting to markdowns." Inventory at the end of the quarter reduced to $46.5 million from $52.1 million at the end of fiscal 2008. For the six-month period, the company posted net income of $15.76 million or $0.22 per share, compared to net income of $19.62 million or $0.27 per share in the preceding year. Net revenues for the period increased 10% to $179.4 million from $162.42 million a year ago. Net revenue from corporate-owned stores grew 7% to $158 million from $147.7 million a year ago, with a comparable-store sales decline of 5% on a constant-dollar basis. Looking ahead to the third quarter, the company expects diluted earnings per share to be in the range of $0.11 - $0.13. Reported net revenues are anticipated to be between $95 million and $100 million. Analysts are looking for earnings of $0.12 per share on revenues of $89.5 million for the third quarter.
Further, Lululemon expects third-quarter comparable-store sales to be relatively flat on a constant-dollar basis. "Our strong community relationships and focus on healthy lives combined with a continuous flow of well designed, functional, high-quality merchandise is creating a justifiable purchase even to the cautious consumer," added Christine Day.
Among others in the industry, performance apparel and footwear maker Under Armour, Inc. (UA) announced its second-quarter results on July 28, reporting an increase in profit, helped by a 16.5% growth in apparel net revenue. Quarterly net income rose 4.7% to $1.44 million from $1.38 million in the previous year. On a per-share basis, earnings were $0.03, flat with the same period last year. Net revenues for the quarter grew to $164.65 million from $156.68 million in the preceding year.
LULU is currently trading at $22.82, up $1.21 or 5.6%, on a volume of 441 thousand shares. For the past 52 weeks, Lululemon shares have been trading between $4.33 and $27.99.
LLL.TO trades at C$24.65, up C$1.26 or 5.39% on 44 thousand shares.
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