We're back to reviewing second-quarter earnings, and in today’s issue I’ll be walking through Lululemon, S&P Global, and Hermès.
Last week I sent out the portfolios of famous investors, along with comments on the ones I found most interesting. I wanted to get that out while the Q2 filings were still fresh. From here, the plan is to work through the rest of the major companies from the quarter.
One question I’d love your feedback on. Sometimes I finish one review well before the others in the batch are ready. Would you rather get each one as it’s done, or keep them grouped together like this?
Sending them individually would get them to you sooner, though I also don’t want to flood your inbox. I always try to keep these emails digestible, so I’m leaning toward sending each review as it’s completed, but definitely reply and let me know if you have a strong preference either way.
Let’s dive in.
Disclaimer: This is not financial or investment advice. I'm sharing my personal investment decisions and reasoning for educational and informational purposes. Always do your own research before making any investment decisions.
I. Lululemon ($LULU)
Lululemon designs and sells premium athletic apparel, footwear, and accessories. Nearly all of its revenue comes through its own stores and e-commerce sites, with the Americas its largest market and China mainland its main growth engine. This quarter, comparable sales fell in every region, and management cut its full-year guidance.
Quarter at a Glance
Revenue: $2.42B, -5% YoY in constant currency
Traffic declined in both stores and digital, with management citing brand sentiment pressure and an inconsistent response to new product launches.
Diluted EPS: $2.92, -6% YoY
IEEPA tariff refunds and associated interest contributed $0.86, so earnings excluding them were $2.06 against $3.10 a year ago, a 34% decline.
Comparable Sales: -10% YoY in constant currency
New store openings account for the gap against the 5% revenue decline.
Americas Revenue: -8% YoY in constant currency
U.S. net revenue declined 8% and Canada declined 9%, while Americas comparable sales fell 12%.
International Revenue: +2% YoY in constant currency
China mainland declined 2% despite rising 4% on a reported basis, with comparable sales there down 8%.
Gross Margin: 60.5%, +200 bps YoY
Tariff refunds added 560 bps, and excluding them the margin fell roughly 355 bps as tariffs, markdowns, and fixed cost deleverage outweighed efficiency gains.
Operating Margin: 18.8%, -190 bps YoY
SG&A deleveraged 400 bps to 41.7% of revenue on fixed costs, marketing, store labor, and proxy contest fees, partly offset by an incentive compensation reversal.
FY2026 Guidance: Revenue of $10.35B to $10.50B, -5% to -7% YoY
Reduced, with diluted EPS of $9.48 to $9.73 against $13.26 in 2025, and no further tariff recovery assumed beyond the $0.86 already recognized.
What Mattered
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