Lululemon's latest quarterly results fell below market expectations, and ahead of its new CEO's arrival, the company again lowered its full-year outlook, causing the market to become more cautious about the athletic apparel company's growth prospects. Following the earnings release, the company's stock plunged by approximately 20%.
The company's second-quarter revenue was $2.42 billion, a 4% year-over-year decline and below the analyst expectation of approximately $2.46 billion. The Americas, its largest market, continued to weaken, with revenue down 8% year-over-year, indicating ongoing pressure on core demand in the region.
Sales of core products have significantly declined.
More attention is being paid to changes in product mix. According to Reuters, citing data, sales of Lululemon’s iconic yoga pants have declined by approximately 20%. This category, once a key driver of the company’s growth, is now weakening, signaling that the brand’s appeal in its core products is being tested.
This change stands in stark contrast to two years ago. In fiscal 2024, Lululemon’s annual revenue still grew 10% to $10.6 billion, with management reporting growth across multiple regions and product categories. Today, both its core products and key markets are experiencing simultaneous slowdowns, and market expectations for its recovery pace have been lowered accordingly.
Annual revenue expectations continue to be lowered
Lululemon currently expects revenue for fiscal year 2026 to decline by 5% to 7%, corresponding to sales of approximately $10.35 billion to $10.5 billion. The updated guidance reflects a more conservative outlook for the company’s operations over the coming quarters.
While facing pressure on revenue, the company continues to expand offline, with store area increasing by approximately 11% year-over-year. This intensifies operational pressure: as the largest market contracts, cost structures originally configured for growth may erode profitability more rapidly.
The new CEO faces a repair mission.
Amid this weaker earnings release, Heidi O’Neill, a former Nike executive, will assume the role of CEO on September 8. Her background is primarily in brand management, product operations, and consumer strategy—areas that the market believes Lululemon most needs to address.
For the new management team, the challenge is no longer just a single-quarter performance slowdown, but rather how to reignite the appeal of core products and rebalance the pace of expansion with actual market demand. If sales of key categories remain weak, the fixed cost pressure from store expansion could further intensify operational difficulties.