Lululemon has revised its financial outlook downward and reported its first revenue shortfall in over two years following a problematic product launch and a slowdown in growth across the Americas. The company now projects its annual net revenue to fall between $10.38 billion and $10.48 billion, a decrease from the earlier forecast of $10.7 billion to $10.8 billion. Earnings per share are expected to range from $13.95 to $14.15, down from the previous estimate of $14.27 to $14.47. In the fiscal second quarter, Lululemon's performance compared to Wall Street expectations showed mixed results. After an initial drop, Lululemon's stock rose over 2% in after-hours trading. The company reported a net income of $393 million, or $3.15 per share, up from $342 million, or $2.68 per share, in the same period last year. Sales increased to $2.37 billion, reflecting a 7% rise from $2.21 billion a year prior. However, comparable sales growth was disappointing at 2%, significantly below the anticipated 5.9%, with comparable sales in the Americas declining by 3%. Looking ahead, Lululemon's sales growth expectations for the current quarter are set at 6% to 7%, which is lower than the 9.2% growth analysts had forecasted. Nevertheless, the company's profit guidance aligns closely with Wall Street's predictions, with third-quarter earnings per share anticipated to be between $2.68 and $2.73, compared to the estimate of $2.70. During the quarter, Lululemon withdrew its Breezethrough leggings, launched in early July, due to numerous complaints regarding their fit. CEO Calvin McDonald addressed the Breezethrough situation during an analyst call, describing it as a learning opportunity. He noted that while customers appreciated the fabric, the design did not meet their expectations. McDonald emphasized the importance of customer feedback in the brand's growth and expressed optimism about reintroducing the fabric in the future, stating that the decision to pause sales had minimal impact on the quarter's performance. The company has faced additional challenges related to its product assortment, including a lack of desired colors and sizes for its core customers, which has negatively affected sales in the U.S. Sales in the Americas grew by only 1%, the company's largest market. McDonald acknowledged a slowdown in Lululemon's women's segment in the U.S., attributing it primarily to a shortage of new styles, which has adversely affected sales of bottoms and online transactions. He remarked that while the new products that were available performed well, there simply weren't enough to motivate purchases. Despite these challenges, McDonald asserted that Lululemon's brand remains robust in the U.S. market, with the men's segment continuing to expand. He noted that customers are actively seeking out Lululemon products, both in stores and online. These product-related issues have arisen following the departure of Sun Choe, the company's long-serving chief product officer, who left in May for another opportunity. This transition raised concerns about the company's capacity to innovate and attract customers with trendy offerings. McDonald stated that a succession plan was in place at the time of Choe's exit, with global creative director Jonathan Cheung now reporting directly to him and overseeing product design and innovation. Additionally, Nikki Neuburger has been appointed as the new chief brand and product activation officer, responsible for merchandising, footwear, and product operations. McDonald expressed satisfaction with the new organizational structure, which aims to balance design and merchandising effectively. As with many retailers facing declining demand, Lululemon is concentrating on improving its internal operations and efficiency. Although the sales figures for the quarter were disappointing, the company's profits exceeded expectations. Gross profit rose by 9% to $1.4 billion, and the gross margin increased by 0.8 percentage points to 59.6%, surpassing the forecasted figures. Both operating margin and operating income also saw increases. Notably, sales in Lululemon's international markets surged by 29%, as the company looks to China for future growth opportunities.