Lululemon shares plunged 20 percent in premarket trading Friday after the company reported a second-quarter miss and cut full-year guidance. [1] CNBC updated the tape at 8:45 a.m. Eastern. [1] Revenue fell 4 percent to $2.4 billion. [1][2] Comparable sales fell 9 percent, or 10 percent in constant dollars. [2] Americas comps fell 12 percent. [2] Diluted earnings were $2.92 a share, including $0.86 from tariff refunds. [2] Heidi O'Neill, the Nike executive named CEO in April, takes over next week. [1][2] Do not write that she has started. Do not treat the tariff refund as operating recovery.
Interim Co-CEO and chief financial officer Meghan Frank told analysts the company saw "negative commentary" on social media that affected second-quarter performance, and a "greater-than-expected" slowdown in core categories, including leggings. [1] "While we are seeing good guest reaction to our activations and some of our newer styles, the overall response to our product launches remains inconsistent, and we've continued to see pressure on the brand in both of our largest markets," she said. [1] MSM is a miss-and-guidance story. Frank herself named social-media commentary as a sales input. X is in the call, not a sideshow. No independent $LULU /status/ URL was recovered.
The company beat on adjusted earnings and missed on revenue. Adjusted earnings were $2.06 a share against $1.79 expected. Revenue was $2.42 billion against $2.46 billion expected. [1] Net income was $329.2 million, or $2.92 a share, against $370.9 million, or $3.10, a year earlier. [1] Gross profit fell 1 percent to $1.5 billion. Gross margin rose, boosted by $134.5 million in International Emergency Economic Powers Act tariff refunds, which the company said added 560 basis points to gross margin and $0.86 to diluted earnings, net of tax, with $4.1 million of associated interest booked as other income. [2] A refund is a refund. It is not demand.
Full-year net revenue is now expected at $10.35 billion to $10.50 billion, a decline of 5 to 7 percent, down from prior guidance of $11.00 billion to $11.15 billion. [1][2] Full-year diluted earnings are now $9.48 to $9.73 a share, against prior $10.95 to $11.15, and that outlook includes the $0.86 tariff-refund boost. [1][2] Third-quarter revenue is guided to $2.290 billion to $2.320 billion, down about 10 to 11 percent, with earnings of 93 to 98 cents a share. [1][2] International net revenue rose 4 percent, or 2 percent in constant dollars. Americas net revenue fell 8 percent. [2] The company opened nine net new stores in the quarter and ended with 825. [2] It repurchased 2.7 million shares for $330.0 million. [2] Store count is not a turnaround.
André Maestrini, the other interim co-CEO, thanked staff and said the company looked forward to welcoming O'Neill "next week." [2] Frank said management is introducing new styles and tightening inventory. [1] "We know there is much more work to be done." [1] Next week is the handover. Friday is the cut.
-- HENDRIK VAN DER BERG, Brussels