Lululemon Athletica Inc. (LULU) had a rough Friday. Shares dropped 8% after the athletic apparel retailer served up a mixed bag of first-quarter results, second-quarter guidance that missed Wall Street's targets by a mile, and a full-year outlook that got slashed significantly. The stock hit a new 52-week low of $114.65, a level not seen since 2018.

Here's what happened: Revenue for the first quarter came in at $2.47 billion, up 4% from a year ago and slightly ahead of the $2.43 billion analysts expected. On a constant-currency basis, revenue grew just 2%. Adjusted earnings were $1.69 per share, narrowly missing the consensus estimate of $1.70 per share. So far, not terrible.

But the outlook is where things get ugly. For the second quarter, Lululemon expects revenue between $2.45 billion and $2.48 billion — well below the $2.60 billion analysts were looking for. Earnings per share are forecast at $1.76 to $1.81, compared with the $2.71 consensus. That's a huge gap. The company also lowered its fiscal 2026 revenue forecast to a range of $11 billion to $11.15 billion, down from prior guidance of $11.35 billion to $11.5 billion, and cut its full-year earnings outlook to $10.95 to $11.15 per share from $12.10 to $12.30. Analysts had been expecting $12.31 per share.

BTIG analyst Janine Stichter downgraded the stock from Buy to Neutral, and her reasoning goes beyond just the numbers. She notes that while the first-quarter results were broadly in line, the late-quarter slowdown points to more execution risk ahead. In fact, the second quarter is expected to be the first post-COVID sales decline for the company. Stichter writes that despite ongoing efforts across product, marketing, and merchandising, trends could weaken further before stabilizing. Management cited multiple factors for the weakness, but the analyst sees the core issues as still not fully resolved. "The root of the challenges not fully diagnosed," she says, leaving the company in a transitional phase ahead of incoming CEO Heidi O'Neill, who takes over in September. The guidance also assumes limited improvement in North America, while comparisons get tougher as promotional support normalizes, potentially pressuring demand. Stichter slashed her second-quarter EPS estimate to $1.81 from $2.58 and now sees fiscal 2026 EPS of $10.99 versus $12.29 previously.

Needham analyst Tom Nikic is also cautious, reiterating a Hold rating. He says he remains sidelined on Lululemon following a difficult quarter and a significant reduction in the full-year outlook. With a weak macro backdrop, intensifying competition, and a new CEO not joining for another two months — with potential for further resets — Nikic sees limited visibility to call a bottom confidently.

So what's the takeaway? Lululemon is in a tough spot. The brand still has strong recognition, but the numbers suggest that the challenges are deeper than a single bad quarter. Investors will be watching closely to see if the new CEO can turn things around, but for now, the outlook is cloudy.