Lululemon shares plunge after profit drop, forecast downgrade

Lululemon Athletica Inc.’s shares sank about 17 per cent, a day after the retailer revealed a slump in its financial performance and slashed its guidance for the year.

The Vancouver-based company’s shares closed out Friday down US$21.16 at US$100.61 on the Nasdaq.

Lululemon announced Thursday after markets closed that its second-quarter profit, revenue and comparable sales were down from a year ago, prompting it to downgrade its expectations for the remainder of the year.

Partially triggering the reduction was customers, who have been “inconsistent” in their response to Lululemon’s merchandise. While more relaxed fits were proving popular, Lululemon’s star product — leggings — are experiencing a greater-than-expected slowdown, the company said. 

Lululemon also admitted it had taken a hit from months of bad publicity. For most of the year, it was locked in a now-paused feud with its estranged founder Chip Wilson. It also had to temporarily remove a leggings line that was too see-through and faced criticism in China, where it used a Japanese drum at a yoga festival.

The troubles preceded Lululemon’s new chief executive. Former Nike executive Heidi O’Neill will assume the top job next week.

Neil Saunders, managing director at analytics and consulting firm GlobalData, said Thursday’s financial results and guidance cut signal that “things have gone from bad to worse at Lululemon.”

The brand’s sales are now firmly in decline, driven by significant revenue erosion in the Americas, a region including its home market, Canada, he said.

“Given that the overall athleisure category has been nowhere near this soft, and that other brands are still producing reasonable growth, there is no external reason for the numbers to be quite this bad,” he wrote in an email. “The reason they are is because Lululemon has gone firmly off the boil.”

He blamed much of the company’s troubles on a product mix he said had become “boring” and grown to include too many items that aren’t very stylish and don’t feature much innovation. Customers won’t pay Lululemon’s premium prices for “what they see as mediocrity,” he said.

To reverse its misfortunes, Lululemon said Thursday that it is streamlining its merchandise and reducing the number of products in stores by 15 per cent to give shops a less crammed presentation. 

It is also refocusing on full-price products in hopes of weaning customers off markdowns and aggressively reordering styles, like less fitting pants, that seem to be resonating with customers.

However, Peter McGoldrick, a retail analyst with Stifel, thinks Lululemon is a business “still searching for a bottom.”

Analysts have become accustomed to Lululemon facing pressure in the Americas as trendy competitors like Alo and Vuori lure in shoppers. 

Yet the recent decline in its Chinese performance was a surprise, he said in a note to investors. 

China had more recently become a bright spot for Lululemon.

But its weaker sales, even during the buzzy 618 sales day on e-commerce platform Tmall, and the fallout from its drum misstep “raise questions on China growth, previously the most important growth driver in the business,” McGoldrick said. 

Lorraine Hutchinson, Bank of America Securities research analyst, agreed it was a point of concern.

The miss in China, coupled with a lack of progress to rebounding in North America, “push the recovery timeline further out,” she said in a note to analysts Friday.

This report by The Canadian Press was first published Sept. 4, 2026.