This article first appeared on GuruFocus.
Lululemon Athletica inc. (NASDAQ:LULU) fell 18.14% premarket after reporting second-quarter net revenue of $2.42 billion, down 4%, and comparable sales down 9%. Analysts had expected $2.46 billion. Diluted EPS came in at $2.92 against $3.10 a year earlier. That figure includes $0.86 from International Emergency Economic Powers Act tariff refunds of $134.5 million, which also lifted gross margin by 560 basis points and operating margin by the same amount.
Americas revenue fell 8% and comparable sales dropped 12%, while international revenue rose 4%. Operating income declined 13% to $453.7 million and operating margin narrowed 190 basis points to 18.8%, with selling, general and administrative expenses climbing to 41.7% of revenue from 37.7%. Interim CEO Meghan Frank told analysts the response to product launches remains inconsistent, citing pressure in both of the company's largest markets.
Third-quarter revenue is now expected between $2.29 billion and $2.32 billion, a decline of 10% to 11%. Full-year revenue guidance dropped to a range of $10.35 billion to $10.5 billion from $11 billion to $11.15 billion, with EPS cut to between $9.48 and $9.73 from $10.95 to $11.15. Incoming CEO Heidi O'Neill starts next week.