Lululemon slashes revenue forecast again as activewear competition intensifies

Lululemon Athletica is bracing for a sharper downturn than it predicted just three months ago. On Thursday, the Vancouver apparel maker announced it now expects fiscal 2026 revenue—the year ending January 31, 2027—to fall between 5 and 7 percent compared to the prior year, landing somewhere in the range of $10.35 billion to $10.5 billion in U.S. dollars. The revision marks a dramatic shift from the company's June guidance, when executives had signaled revenue would be essentially flat or decline by only about 1 percent. In the span of a single quarter, the outlook darkened considerably.

The deterioration reflects what Meghan Frank, the company's chief financial officer and interim co-chief executive, described as "challenging dynamics" that continue to weigh on both sales and profitability. Speaking on a conference call Thursday to discuss second-quarter results, Frank acknowledged that while the company has seen positive customer response to certain activations and newer styles, the overall reception to product launches remains uneven. More troubling, she noted, is sustained pressure on the brand in its two largest markets: North America and mainland China. The company had initially banked on international growth to offset modest declines in North America, but that calculus has shifted.

The second quarter itself delivered disappointing numbers. Net revenue came in at $2.4 billion, down 4 percent year-over-year, or 5 percent when adjusted for currency fluctuations. More strikingly, comparable sales—the metric that strips out the noise of store openings and closures to show true underlying demand—fell 9 percent, or 10 percent on a constant-currency basis. In North America alone, comparable sales dropped 12 percent, a result that fell far short of analyst expectations of roughly 5.8 percent growth. Net income declined to $329.2 million, or $2.92 per share, from $370.9 million, or $3.10 per share, in the same quarter the previous year.

At the heart of the struggle is a fundamental shift in consumer preference. Leggings, the category that built Lululemon's reputation and drove its early growth, have become a liability. Sales in that category alone fell roughly 20 percent in the second quarter. The culprit is not a loss of interest in activewear itself, but rather a move away from the skintight silhouettes that once defined the brand. Shoppers are gravitating toward wider-leg styles instead. Frank pointed to products like the Groove wide-leg pants, Align joggers, and Dance Studio pants as offerings expected to gain traction in the second half of the year, suggesting the company believes it can recalibrate its product mix to match evolving tastes.

But the challenge extends beyond fit and silhouette. Lululemon faces an increasingly crowded competitive landscape. Brands like Alo, Vuori, and Gymshark have captured market share from customers seeking fresh alternatives to Lululemon's offerings. The company's efforts to reverse course—including increased marketing spending, store renovations, and faster product cycles—have not yet moved the needle. Frank acknowledged that the company is now taking an "even more aggressive stance" on cost reduction, a tacit admission that revenue growth alone will not solve the problem.

The timing of these challenges coincides with a leadership transition. Heidi O'Neill, a veteran from Nike, is set to assume the role of chief executive next week. She inherits a company that must simultaneously defend its core market position, adapt to shifting consumer preferences, and prove it can compete against a wave of newer, nimbler rivals. The two consecutive forecast cuts in as many quarters underscore the urgency of that task.