Lululemon Outlook Cut
Lululemon cuts annual revenue and profit forecasts amid decreased US demand and competition.
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Lululemon slashed its full-year revenue and profit forecasts on June 4, sending shares down more than 7% in after-hours trading. Reuters reported the athletic apparel maker now expects fiscal 2026 revenue of $11.0B–$11.15B — essentially flat compared to last year — down from an earlier forecast of $11.35B–$11.50B.
The company also cut its full-year earnings per share outlook from $12.10–$12.30 all the way down to $10.50–$11.15, a cut of roughly $1.25 per share at the midpoint. Lululemon cited vague "undisclosed headwinds" without giving specifics, according to CNBC.
Weak Q2 Guidance Deepens Wall Street's Concern
Beyond the annual cut, Lululemon's second-quarter forecast also missed expectations. The company guided for Q2 revenue of $2.45B–$2.475B and earnings per share of just $1.76–$1.81. Both numbers came in below what analysts had expected, according to TheStreet.
The company's inventory levels add to the worry. Lululemon ended 2025 with $1.7 billion in inventory — up 18% year over year. That kind of buildup often leads to discounts and markdowns, which eat into profit margins. Gross margin already contracted 550 basis points in late 2025, driven largely by tariff costs and promotional activity.
US Demand Is Fading as Rivals Close In
Lululemon's core problem is eroding brand appeal at home. Yahoo Finance noted the company is grappling with "waning brand appeal in the U.S. amid tough competition." Newer rivals like Alo Yoga and Vuori have been opening stores right next to Lululemon locations and winning over younger, Gen Z shoppers.
The Americas segment has now posted flat or negative comparable sales for roughly eight straight quarters. Meanwhile, China Mainland revenue rose 30% in Q1, showing that Lululemon's troubles are not global — they are concentrated in North America, where the brand first built its loyal following.
Tariffs, Proxy Fight, and a New CEO Add to the Pressure
The "undisclosed headwinds" likely include U.S. import tariffs on Chinese-made goods, which carry an estimated gross impact of around $380 million, according to analyst research. Dana Telsey, CEO of Telsey Advisory Group, pointed to "product strategy, tariffs, and international expansion" as the key factors driving the weak outlook.
The company is also in the middle of a leadership transition. Founder Chip Wilson settled a months-long proxy fight on May 27, winning two board seats for his nominees. Incoming CEO Heidi O'Neill, a former Nike executive, does not formally take over until September 2026. In the meantime, CFO Meghan Frank said the company's top priority is "returning to full-price sales growth through steps that include the inflection of product newness," according to Reuters.
Bulls and Bears Split on Whether This Is a Buying Opportunity
Some analysts see a turnaround story. Bulls point to Lululemon's still-healthy operating margin of 19.9% and 30% China growth as signs the brand is not broken — just going through a slow patch. They argue the stock looks cheap trading around 14 times earnings.
Bears are less convinced. Analysts at Evercore ISI called for a "big reset" of expectations, with one analyst noting that "outlook risk outweighs the stock's attractive valuation." Others warn that the headwinds are not just temporary. They say consumer preference may be shifting permanently toward fresher brands, making Lululemon less a growth story and more a mature, slower-moving business, according to TradingView.
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