--- title: "LULU: Alo's assault, aging classics — after the 'black leggings' blow-up, another ahead?" type: "Topics" locale: "en" url: "https://longbridge.com/en/dolphin/post/43751222.md" description: "Results missed expectations, and Q3 guidance now points to a 10–11% revenue decline. Shares plunged 18% after hours to around $100, setting a new 52-week low." datetime: "2026-09-04T02:50:37.000Z" locales: - [en](https://longbridge.com/en/dolphin/post/43751222.md) - [zh-CN](https://longbridge.com/zh-CN/dolphin/post/43751222.md) - [zh-HK](https://longbridge.com/zh-HK/dolphin/post/43751222.md) author: "[Dolphin Research](https://longbridge.com/en/dolphin.md)" generator: "portal-rs" --- # LULU: Alo's assault, aging classics — after the 'black leggings' blow-up, another ahead? Lululemon released its Q2 FY26 results (through Aug 2, 2026) after U.S. market close on Sep 4 Beijing time. **A miss on results, coupled with Q3 guidance calling for revenue down 10%-11%, sent the stock tumbling 18% after-hours to around $100, breaking a 52-week low.**$Lululemon(LULU.US) **Specifically:** **1) Revenue missed the low end of guidance.** 2Q26 revenue was $2.42bn, down 4% YoY (-5% ex-FX), **below the low end of the company’s guidance from three months ago, with comps at -9%, the weakest since COVID.** While the market was braced for North America softness, Intl growth slowed to just 4% this quarter, also disappointing. **2) China 'stalled.'** By region, North America revenue fell 8% YoY with comps -12%, as weak as before. **Management said the main pressure was traffic, with conversion not worsening further.** The real negative surprise was mainland China, down 2% ex-FX with comps -8%, the first fixed-FX decline since market entry. **The company cited a PR backlash tied to cultural marketing and the removal of Tmall 618 pre-sales, but with comps swinging from +26% to -8% in two quarters, we believe underlying demand is already slowing and the controversy merely pulled forward the inflection.** Other Intl markets grew 5% (+6% ex-FX) with comps -3%, still weighed by Middle East conflict and softer travel in Europe/Japan. **3) Core categories are fading; newness hasn’t offset.** By category, women’s revenue was $1.49bn, down 3.8% YoY, the first quarterly decline since COVID. Management quantified the core: **leggings fell about 20% YoY, while looser silhouettes like Groove wide-leg pants and Align fold-over joggers are growing but only offset roughly half; total bottoms were still down mid-single digits.** Men’s revenue was $620mn, down 0.5% YoY, with golf tops holding up. Other (accessories, footwear, etc.) was $310mn, down 13.4% YoY, dragged by bags. **4) Operating leverage evaporated; profitability deteriorated.** Tariffs pushed up production costs and discounts weighed on margins; excluding a one-off tax rebate, Q2 GPM was 54.9%, down 360bps YoY. In a down-revenue quarter, opex still rose >6% YoY, lifting the opex ratio by 400bps to 41.6%. **Ex-rebate OPM was 13.2%, down 750bps YoY.** **5) Guidance cut, again.** **China growth target was cut from ~20% to high-single digits, while Q3 revenue is guided down 10%-11% with OPM ~6.5%, implying further deterioration vs. Q2.** The FY revenue outlook was lowered from 'flat to -1%' to '-5% to -7%', the third consecutive cut, leaving the outlook cloudy. **6) Key financial snapshot** **Dolphin Research view:** Starting with North America, the issues mirror prior quarters, now underscored with numbers: as the brand’s bedrock, leggings fell about 20% YoY, **with legacy core like Align and Wunder Train, which drive most women’s sales, shrinking around 20% annually.** The 'away-from-body' line is selling but clearly cannot offset the core decline. This suggests a structural down-cycle in core categories rather than a couple of mistimed product drops. The repair timeline is measured in years, not quarters. The China miss was the bigger shock. The valuation had held on the 'NA slowdown, China to the rescue' narrative, but this quarter the last straw, China, also broke. Beyond the June cultural-marketing controversy, we worry more about intensifying competition mid-term. **Alo has used social media + fast-fashion iteration to take roughly 15% of high-end yoga pants share from Lululemon in North America and is now bringing the same playbook to China.** Data show Alo Yoga’s Tmall flagship launched Aug 12 with 300+ SKUs and broke RMB 10mn in the first minute, indicating strong demand. As such, we expect Alo’s rollout to pressure China comps in Q3-Q4. **Valuation: using the full-year guide and excluding the one-off tax rebate, net income is around $990mn.** After the ~20% after-hours drop, shares imply roughly 10x P/E. From a trading standpoint, we stay on the sidelines, as repeated guide-downs suggest no one, including management, can call the bottom. **I. Investment framework** Per disclosures, Lululemon’s revenue comes mainly from women’s, men’s and other. We first outline these segments for context. **Women’s: the core pillar.** Since inception, women’s has been the key revenue driver, still >60% of sales. The product matrix centers on yoga pants, complemented by hoodies, outerwear and tees, spanning indoor training and everyday athleisure via fabric-driven lines. **Men’s: a late start and the second growth curve.** Lululemon entered men’s in 2013, borrowing the women’s playbook with comfort + style and fabric-led design. Given a low base, growth has outpaced women’s, and in 2022 management set a plan to double men’s by 2026. **Other: a high-margin complement.** Other includes footwear, accessories and the Lululemon Studio (fitness content), smaller in size but with higher margins and faster growth. Footwear launched in 2022 and remains early-stage but is a management focus. **II. Revenue fell below guidance** 2Q26 revenue was $2.42bn, down 4.3% YoY and -5% ex-FX, missing the low end of the $2.45-$2.48bn guide by about $35mn. It also marks the first back-to-back fixed-FX declines since 2020 (Q1 -2%). **III. By category: women’s turns negative; functional push in men’s not yet paying off** **Women’s: revenue $1.49bn, -3.8% YoY, 61.6% of total; first single-quarter decline since 2020.** Management quantified the core: **leggings down ~20% YoY, total bottoms down mid-single digits.** With leggings at roughly 35%-40% of women’s, they alone dragged women’s by 7-8pts, implying other women’s categories still grew 5%-6%, mainly from 'away-from-body' looser bottoms such as Groove wide-legs, Align fold-over joggers, Breezily, and the refreshed Dance Studio pants. U.S. apparel this year has clearly shifted from functional to everyday casual, suggesting Lululemon bet on a shrinking category in 2026. **Men’s: revenue $621mn, -0.5% YoY, the smallest decline among segments.** On the call, standouts included Metal Vent Tech tees and golf tops (Lewis Hamilton, Min Woo), **which helped drive attach for ABC pants.** Dolphin Research sees the logic as clear: **use specialized performance contexts to sidestep the 'yoga brand' label and rebuild men’s as an independent performance franchise.** Management appears to recognize that slow ABC iterations riding brand halo won’t suffice. But our view on men’s is unchanged: **the hurdle is brand perception, not product.** In men’s performance wear, Nike, adidas, UA and niche specialists already dominate; Lululemon faces structurally higher entry costs. When NA traffic contracts, even good men’s product just 'falls less.' **Other (accessories, bags, footwear): revenue $310mn, -13.4% YoY.** When traffic declines, add-on categories get hit harder than apparel. **IV. China growth 'stalled'** **North America: revenue $1.617bn, -8.0% YoY; comps -12%.** Competitively, Lululemon’s relative position in U.S. sportswear worsened: the category was roughly flat in Q2, while Lululemon fell low double digits, underperforming by >10pts vs. ~4pts last year. In Jun U.S. Google search interest, Lululemon was -6%, ranking 33rd of 35 brands; Nike +29%, Hoka +14%. **Mainland China: revenue $410mn; -2% ex-FX with comps -8%, the first fixed-FX decline since entry.** The main event was the May 30 Great Wall yoga festival 'taiko drum' controversy. Lululemon hosted a 2,000-person event featuring Zhu Yilong, but the drums were alleged to be Japanese rather than Chinese, triggering nationalist sentiment at an iconic venue. Dolphin Research’s Tmall/Taobao GMV tracking shows **May -54% YoY, Jun -45%, Jul -39%, with the Q2 rolling three-month run-rate nearly halving.** This indicates the short-term impact of the controversy was material. Management’s 2H China plan: new flagship locations and events in Tier-1 cities, a Tmall Super Brand Day (full-price, focused on outerwear like Wunder Puff), a World Mental Health Day event in Oct, a five-platform livestream campaign with swimmer Wang Shun, and signing Wimbledon champion Guo Hanyue. **These are largely brand activities that may ease sentiment, but the real threat is Alo’s entry.** **Other Intl: revenue $392mn, +4.7% YoY (+6% ex-FX).** Intl mixes are more diversified and less dependent on newness, with core hero items still selling via color refreshes, thus less exposed to product-cycle shifts. **V. Store openings slowed notably** Q2 net adds were 9 stores (11 opens, 2 closures) to 825 total. By region, North America +7 to 483; mainland China +1 to 174; other Intl +1 to 168. **There were also 12 store optimizations (expansions/relocations), and the overall cadence slowed amid negative comps.** Channel mix: e-comm was 38.7% of revenue, down 5.9% YoY. This suggests last quarter’s relatively stronger online was discount-driven, and as promotions were pulled back in Q2, online also cooled. **VI. Operating leverage unwound; profitability worsened** Tariffs and discounting weighed on margins; ex one-off tax rebate, Q2 GPM was 54.9%, down 360bps YoY. With revenue falling, opex still increased, driving the opex ratio up 400bps to 41.6%. **Ex-rebate OPM was 13.2%, down 750bps YoY.** \ Prior Dolphin Research on Lululemon: Deep dives: Mar 12, 2025: [LULULEMON: How did a pair of black pants break through?](https://longportapp.cn/en/topics/28033092?channel=t28033092&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN) Apr 10, 2025: [Lululemon: Men are unreliable; Intl can’t carry?](https://longportapp.cn/en/topics/28840305?channel=t28840305&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN) Earnings: Mar 18, 2026: [Lululemon: From craftsmanship to ZARA-style speed — can it save the 'black pants'?](https://longbridge.cn/en/topics/39324545?channel=SH000001&invite-code=UIFH4YD0&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=d48fe9d6-bd81-4ecc-9ea4-a3f52e820fff) Apr 1, 2025: [Lululemon: Are the 'black pants' losing their magic?](https://longportapp.cn/en/topics/28526850?channel=t28526850&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN) Jun 6, 2025: [Lululemon plunges again? Profits collapse too fast, valuation de-rates too slow!](https://longportapp.cn/en/topics/30414958?channel=t30414958&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN) Dec 12, 2025: [Lululemon: Rebound or flash in the pan?](https://longbridge.cn/en/topics/37082556?channel=SH000001&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=8f2e2436-4f16-4ba1-a30f-83ec2310e550) ### Related Stocks - [LULU.US](https://longbridge.com/en/quote/LULU.US.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**