Once celebrated for shaping the athleisure movement, Lululemon now finds itself navigating fresh headwinds as demand softens and competition rises. Lululemon is facing a wake-up call as the athleisure giant deals with significant challenges in its home market, with CEO Calvin McDonald acknowledging that the brand has lost its innovative edge. The company’s second-quarter results revealed a stark contrast between its struggling North American operations and thriving international business, prompting a comprehensive overhaul of its design and development strategy.
North America Performance Hits the Brakes
The numbers present a concerning story for Lululemon’s core market. North America revenue crawled to just 1% growth in the second quarter, while comparable sales declined 4%. This performance stands in sharp contrast to the company’s international operations, which delivered impressive results with net revenue surging 22% and comparable sales up 15%.
The disparity between regions has forced Lululemon to dramatically revise its expectations, cutting full-year revenue growth guidance to 2% to 4%, down from previous projections of 5% to 7%. Earnings per share guidance also took a significant hit as the company wrestles with domestic market challenges.
CEO Acknowledges Design Stagnation
In a candid admission during an analyst call, CEO Calvin McDonald didn’t mince words about the company’s missteps. “We have become too predictable within our casual offerings and missed opportunities to create new trends,” said McDonald. “At the same time, we are seeing shifts within the industry,” said McDonald.
The CEO explained that shoppers were spending less on both apparel and performance activewear, but Lululemon’s struggles run deeper than overall market trends. McDonald revealed that the brand was “not happy” with its U.S. results and had conducted a thorough product analysis to identify underlying issues, he stated.
Central to the problem is what McDonald described as stale offerings in key categories. The brand’s “lounge and social offerings have become stale,” he explained, acknowledging that Lululemon relied too heavily on a single playbook for too long. The company also faced customer rejection of new seasonal colors, and, even when shoppers responded positively to certain new styles, Lululemon couldn’t chase demand quickly enough to capitalize on the momentum, he added.
Competitive Pressure Intensifies
Market observers note that Lululemon’s challenges go beyond internal missteps to include increasing competitive pressure. GlobalData Managing Director Neil Saunders observed that while the broader athleisure market grew 3.4%, Lululemon underperformed, indicating market share losses.
“Our data suggest that even relatively loyal Lululemon shoppers are broadening their repertoire, increasingly willing to try alternative brands,” said Saunders. He gave a pointed assessment: “The blunt truth is that Lululemon is no longer the challenger; it is now the brand that other, younger labels look to hunt and take share from,” he noted.
Emerging competitors like Alo Yoga and Vuori are gaining traction, with both showing customer overlap with Lululemon and Nike.
Strategic Overhaul in Motion
Recognizing these challenges, Lululemon is making major changes to revitalize its product offering. The company is accelerating its go-to-market timeframe and expects improvements beginning in 2026. Global Creative Director Jonathan Cheung has assembled fresh design talent to inject new energy into Lululemon’s assortment.
The brand plans to increase new styles to 35% of its overall assortment by next spring, up from the current 23%. This marks a shift in how Lululemon approaches product development and merchandising strategy.
William Blair analysts led by Sharon Zackfia identified the core issue, sharing that “management now believes lounge and social (a combined 40% of the mix) are the key culprits, with product cycles that have run too long yielding fatigue among consumers (particularly high-value, long-term Lululemon customers),” they explained.
Looking Ahead
Beyond design challenges, Lululemon faces external pressures, including a $240 million tariff hit anticipated in 2025, much higher than previously expected.
Emarketer Vice President Suzy Davidkhanian offered a measured outlook: “Looking ahead, holiday gifting may provide a short-term lift, but sustainable growth hinges on whether Lululemon can move credibly into new sport verticals and find the right formula for its footwear,” she stated.
As Lululemon works toward reinvention, the coming quarters will be critical for this once-pioneering brand to reclaim its edge and drive growth both at home and abroad.
