lululemon Sales Fall 4% as Tariff Refunds Lift Second Quarter Margins

Americas revenue fell 8%, while international revenue grew 4%. Comparable sales declined in both regions, falling 12% in the Americas and 3% internationally. On a constant-currency basis, total comparable sales fell 10%. Reported profitability benefited from $134.5 million in tariff refunds.

Gross margin rose 200 basis points to 60.5%, but the refund contributed 560 basis points. The refund contribution was larger than the entire margin increase. Excluding that contribution, gross margin would have been 54.9%, compared with 58.5% a year earlier, a decline of 3.6 percentage points.

The reported improvement therefore concealed weaker underlying profitability on each dollar of sales. Operating income fell 13% to $453.7 million. Diluted earnings per share were $2.92, compared with $3.10 a year earlier, including an $0.86 benefit from tariff refunds and related interest after tax.

Lululemon expects revenue of $10.35 billion to $10.5 billion, a decline of 5% to 7%, and diluted earnings per share of $9.48 to $9.73. The company ended the quarter with 825 stores after nine net openings. The fall in comparable sales in both regions shows that international revenue growth was not a broad…