How Bad Would Falling Sales Be For Lululemon Stock?
Lululemon Athletica (LULU) stock has lost 44.6% over the past year, trailing the 17.3% return of the S&P 500. The underlying business has also turned lower. Revenue fell 4.3% from a year earlier in the quarter that ended on August 2, 2026. On September 3, management lowered its full-year revenue forecast and called the new outlook prudent. If sales stayed at the latest quarter’s level for a year, how much would Lululemon still earn?
At Current Revenue, Lululemon’s Earnings Shrink Sharply
If the latest quarter simply repeated four times, Lululemon would earn $1.32 billion in a year, compared with $1.42 billion of net income over the past twelve months. But that quarter included about $97 million of one-time tariff refunds after tax. Excluding them, the run-rate falls to about $0.93 billion. This figure represents the latest quarter multiplied by four, rather than a forecast, and it does not capture the quarter ending in February, Lululemon’s largest by sales.
Profit fell faster than sales in the latest quarter. Net income dropped to $329 million from $371 million a year earlier, and Lululemon kept less of each sale. The company posted an operating margin of 18.8%, down from 20.7%, but tariff refunds added 5.6 percentage points. Excluding them, the margin was about 13.2%.
At the October 14 close, the stock traded at 7.5 times its earnings over the past twelve months, a figure that includes the one-time refund. Based on the latest quarter multiplied by four and excluding the refund, Lululemon’s market value is about 11.5 times earnings.
Shareholders have seen deep falls before: Lululemon stock lost 34% in the 2022 inflation shock, against 25% for the S&P 500.
Is Lululemon’s Balance Sheet A Problem If Sales Shrink?
Not according to the latest figures. Lululemon had no bank or bond borrowings on August 2, 2026, and held $1.39 billion of cash and cash equivalents. Its main obligations were $2.14 billion of lease liabilities, and free cash flow over the past twelve months of $1.35 billion equaled about 63% of that total.
Cash kept arriving even as sales fell. Free cash flow in the latest quarter reached $225 million, compared with $151 million a year earlier.
Lululemon also spent $1.16 billion buying back its own shares over the past twelve months, equal to 10.8% of its market value. Buybacks are optional, so the company could keep that cash if sales kept falling, although management said on September 3 that it expects 2026 repurchases to match 2025’s.
What To Watch In Lululemon’s December Report
Management already expects a weaker year, having cut the full-year earnings forecast on September 3 to $9.61 a share at the midpoint, from $11.05, a figure that includes $0.86 a share from tariff refunds. Lululemon’s answer is to accelerate growth by strengthening its product offerings and spending more on marketing.
Lululemon’s next report is expected on or around December 9, 2026. The number to watch is revenue for the third quarter of fiscal 2026. Management guided it to a range of $2.29 billion to $2.32 billion, against $2.57 billion in the same quarter a year earlier. That is a steeper fall than the latest quarter’s 4.3%, and management expects earnings of just $0.93 to $0.98 a share for the quarter, down from $2.59 a year earlier, so the run-rate estimate above is likely generous.
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