In the Wake of a Persistent Sales Slump, Lululemon's Outlook is Slashed

Lululemon Athletica Inc. shares tumbled after the company’s latest earnings release revealed that the once high-flying yogawear brand is still struggling to break free from a prolonged sales slowdown following years of rapid expansion.

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The retailer sharply cut its near-term outlook, guiding third-quarter revenue between $2.47 billion and $2.5 billion well below Wall Street expectations. For the full year, management lowered its earnings-per-share forecast to a range of $12.77 to $12.97, a steep drop from the earlier high-end estimate of $14.78.

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Lululemon also reduced its projection for total annual net revenue, now expecting between $10.85 billion and $11 billion. That’s down from as much as $11.3 billion forecast earlier in 2024.

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Investors reacted swiftly to the disappointing update. Shares sank more than 13% in New York trading on Thursday afternoon, compounding a rough year for the stock.

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“We are disappointed with our U.S. business results and aspects of our product execution,” Chief Executive Officer Calvin McDonald admitted in a statement accompanying the report.

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Comparable sales growth highlighted the company’s challenges. For the second quarter, same-store sales rose just 1%, falling short of analysts’ estimates of nearly 3%. The weak performance underscores how Lululemon’s momentum has cooled significantly since its pandemic-era boom.

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Management has warned for months that consumers are tightening their budgets, particularly in discretionary categories like premium apparel. To offset rising tariff costs, Lululemon raised select product prices, but that strategy has been met with cautious reception from shoppers already pulling back.

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McDonald has also focused on reshaping the company’s operations. In June, Lululemon cut 150 corporate roles across its store support centers as part of a broader restructuring push aimed at creating a leaner, more efficient organization.

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Despite these efforts, the stock has been unable to regain investor confidence. Through Thursday’s close, shares have lost 46% year-to-date, erasing much of the value gained during the pandemic when demand for comfortable athleisure apparel skyrocketed.

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The shift is stark: revenue had surged 140% over the prior four years, fueled by aggressive expansion and surging brand popularity. But that pace has now slowed dramatically, leaving Lululemon exposed to both rising competition and shifting consumer trends.

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Emerging rivals such as Alo Yoga and Vuori have successfully captured younger shoppers and cut into Lululemon’s market share. At the same time, the entire apparel sector is grappling with the challenge of balancing higher input costs from tariffs while protecting profit margins.

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To reignite growth, Lululemon is turning to a more aggressive marketing playbook. The company has ramped up investment in athlete partnerships to broaden its brand image beyond its yoga roots and capture a wider consumer base.

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Tennis standout Frances Tiafoe wore Lululemon apparel during the U.S. Open, while PGA Tour golfer Max Homa has been sporting the brand on the course. The most high-profile move came with the signing of seven-time Formula 1 world champion Lewis Hamilton as a global ambassador a clear signal that Lululemon intends to position itself as a performance lifestyle brand with broader appeal.

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Still, the path forward won’t be easy. Investors remain cautious as the company works to balance cost pressures, rekindle sales growth, and fend off rising competition. For a brand that thrived on aspirational appeal and premium positioning, regaining momentum in a more cautious spending environment will take more than celebrity endorsements.

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The next few quarters will be critical in determining whether Lululemon can stabilize its U.S. business, maintain international growth, and restore faith among investors. For now, the retailer’s sharp guidance cut and steep share price drop highlight just how challenging the turnaround will be.

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