The latest quarter's performance fell short of market expectations, and before the new CEO took office, the company once again lowered its full-year outlook, causing the market to become more cautious about the growth prospects of this sports apparel company. Following the release of the financial report, the company's stock price plummeted by about 20%.

The company's revenue in the second quarter was $2.42 billion, a year-on-year decrease of 4%, which fell short of analysts' expectations of around $2.46 billion. The Americas region, being the largest market, continued to show weakness, with revenue declining by 8% year-on-year, indicating that demand in its core markets is still under pressure.

Core product sales have significantly declined.

What attracts more attention is the change in product structure. Reuters cites data indicating that the sales of the iconic Lululemon yoga pants have decreased by about 20%. This category was once an important pillar of the company's growth, but now its strength has waned, which means that the brand's appeal in its core products is being tested.

This change is in sharp contrast to what happened two years ago. In the fiscal year 2024, Lululemon still saw a 10% increase in annual revenue to $10.6 billion, and at that time, management was reporting growth in multiple regions and product categories. Now, both its core products and main markets have seen a slowdown, and market expectations for its recovery speed have also been lowered accordingly.

Annual revenue forecasts continue to be lowered

Lululemon Currently, it is estimated that revenue for the fiscal year 2026 will decline by 5% to 7%, corresponding to sales of approximately $10.35 billion to $10.5 billion. The latest guidance indicates that the company's outlook for the coming quarters is more conservative.

While facing pressure on revenue, the company continues to expand its offline presence, with store areas increasing by approximately 11% year-on-year. This also exacerbates operational pressures: when the largest market shrinks, the cost structure that was originally allocated for growth may erode profit performance more quickly.

The new CEO faces repair tasks.

On the occasion of this weak performance report, former Nike executive Heidi O Neill will take over from CEO on September 8th. She was previously mainly responsible for brand management, product operations, and consumer strategy, which are precisely the areas that the market believes Lululemon currently needs to improve the most.

For the new management team, the challenge is not just about a single quarter of poor performance; it also lies in how to restore the attractiveness of core products and find a new balance between expansion pace and the reality of demand. If sales of key products continue to be weak, the fixed costs associated with store expansion may further increase the difficulty of operations.