Lululemon Athletica Inc. shares plummeted approximately 18% in premarket trading after the company slashed its full-year sales and profit guidance for the second time. The sportswear maker now anticipates fiscal 2026 revenue to decline by 5% to 7%, a downward revision from its previous forecast of remaining flat or declining up to 1%. Earnings per share are now expected to be between $9.48 and $9.73, down from the prior projection of $10.95 to $11.15. This poor outlook stems from a disappointing second quarter, where revenue decreased 4% to $2.42 billion, falling short of the $2.46 billion analysts expected, and comparable sales were down 9%. The Americas market saw an 8% decline in revenue, while mainland China, Lululemon's second-largest market, experienced an 8% drop in comparable sales after currency adjustments, and overall revenue decreased 2% in constant dollars.
The decline in Lululemon's performance is attributed to several factors, including a weakening demand in North America due to inflationary pressures and increased competition from rivals like Alo Yoga and Vuori, which have gained market share. The company also acknowledged marketing missteps, such as a controversial campaign on the Great Wall of China. Sales of leggings, a core product, decreased about 20%. Analysts, such as Brian Nagel from Oppenheimer Research, suggest investors await the new CEO Heidi O'Neill's initial strategy before taking a more constructive stance on the shares. O'Neill, a former Nike executive, is tasked with revitalizing product innovation and re-engaging consumers, a process that analysts like Mari Shor of Columbia Threadneedle believe could take several years.
In other news, Tesla quietly launched its Cybercab rides in limited areas of Austin, Texas, with 45 fully autonomous, two-seater vehicles registered. The event was muted, with no public livestream, limited invitees primarily comprising pro-Tesla content creators, and CEO Elon Musk notably absent. Executives discussed the manufacturing process and technology of the Cybercab, which is estimated to cost less than $30,000 and operates without a steering wheel or pedals. Tesla shares, which had closed 5.4% higher the previous day, were down 1.6% in premarket trading. Volkswagen AG also announced an additional 50,000 job cuts as part of a wide-ranging restructuring program, bringing its total planned workforce reduction to 100,000 and aiming to halve its model offerings by 2035.
