lululemon Growth Slows Amid Yoga Apparel Controversies and Weak Market Signals

A mid-February CBS News industry analysis flagged new headwinds for lululemon after a decade of rapid growth, pointing to “product controversies (including customer complaints about transparency and fit for certain leggings)” alongside competitive pressure. The timing matters because management has publicly tied a near-term recovery to product newness and has set an ambitious target to shift its new-product mix from 23% to 35% by spring 2026.

The company’s recent results show a split market: second-quarter revenue was up 7% to $2.5 billion, with comps up 1%, but that growth was driven by international strength while the U.S. softened. North America revenue edged up 1% while comps were down 4% in Q2, and international net revenue surged 22% with comps up 15%, underscoring the contrast RetailDive and company executives described on the analyst call.

Product and assortment problems are central to management’s diagnosis. CEO Calvin McDonald said the brand was “not happy” with its results and that the company “has conducted a product analysis to discern deeper problems.” McDonald added, “We have become too predictable within our casual offerings and missed opportunities to create new trends,” and he acknowledged that “at the same time, we are seeing shifts within the industry.” Rijnberkinvestinsights previously warned management “has been dropping the ball on product innovation and development,” saying the product pipeline was “failing to generate excitement and growth, leading to evaporating relevancy and consumer interest in the brand.”

Analysts and investors are zeroing in on the casual, lounge and social categories. William Blair analysts led by Sharon Zackfia wrote that “After taking stock, 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).” William Blair added, “These categories also happen to be key areas of strength for emergent competitors, which will likely feed the flames of investor concerns about competitive infringement.”

Management has responded with operational changes and capital plans. RetailDive and other outlets reported that lululemon is overhauling its product design and development processes and accelerating go-to-market timelines, and that it expects “to see product and performance improvements beginning in 2026.” Investing called the 23% to 35% plan “ambitious” and noted it could be “a catalyst for renewed growth” if launches resonate.

Financial headwinds complicate execution. Swottemplate and Investing cite FY2025 net revenue guidance of $11.150 billion to $11.300 billion with diluted EPS projected at $14.95 to $15.15 and an anticipated approximately 100 basis point operating-margin decrease tied to the Power of Three ×2 investments and foreign-exchange headwinds. RetailDive reported lululemon “slashed its guidance for the year, now expecting revenue growth of 2% to 4%, compared to previous expectations for 5% to 7%,” and that EPS guidance “also took a hit.” RetailDive also reported a specific tariff planning figure of $240 million in 2025, or 220 basis points.

Jefferies’ December 8, 2025 analysis paints a bleaker near-term picture: October showed a 2% increase in foot traffic and a 30% jump in web visits while observed sales declined 5.2%, prompting Jefferies to warn that “Traffic gains from Amex perks and promotions look temporary as brand momentum erodes, markdowns rise, and inventory stays high.” Jefferies modeled Q3 sales of $2.3 billion, down roughly 2% year-over-year with comps down 3%, projected Q3 EPS of $1.98 versus the Street at $2.21, and cut fiscal 2026 EPS to $9 from a Street figure near $12.67, citing margin pressure and outlet discounting.

Competition from Nike, Adidas and direct rivals Alo and Vuori intensifies pressure on product differentiation and pricing. Rijnberkinvestinsights warned earlier that “Lululemon’s fundamental investment case was breaking down” because of tariffs, a cautious U.S. consumer, “growing competition, deepening execution issues, fading consumer demand in its core U.S. market, and a product pipeline that is failing to generate excitement and growth.”

The path forward is narrow and time-bound. Management is “confident an inflection will be seen in spring 2026, when product newness and innovation should be back on track,” and Investing cautioned that “If the new product launches fail to resonate with consumers or face delays in implementation, it could further exacerbate the company’s domestic growth challenges.” Execution on the 23% to 35% newness target, conversion of traffic into sales, and management of a $240 million tariff exposure will determine whether lululemon stabilizes or faces broader margin and market-share erosion.