Lululemon Athletica Inc. (LULU) is facing one of its most difficult leadership transitions in years, with Heidi O’Neill officially becoming CEO on September 8 after 27 years at Nike. The company’s latest fiscal Q2 report sent shares down as much as 20% after hours, as revenue fell 4% to $2.42 billion, comparable sales dropped 9%, and management cut its full-year revenue outlook to $10.35 billion to $10.5 billion — implying a 5% to 7% decline.
The results added to concerns already building before O’Neill’s arrival. In North America, store SKU counts have been reduced by roughly 15% and markdowns have been pulled back to support full-price selling. Yet Americas comparable sales fell 5% in Q1 and Americas revenue fell 8% in Q2. Leggings sales declined about 20% as shoppers shifted toward looser silhouettes and challenger brands such as Alo Yoga, Vuori, and Skims gained traction.
Morningstar senior equity analyst David Swartz told Yahoo Finance that Lululemon has “no real financial problems” and that “the problem is with the sales growth.” Truist analyst Joseph Civello downgraded the stock to Sell, warning that headwinds could be “more structural” than Wall Street assumed. Goldman Sachs lowered its price target to $111 from $122, citing weakening card spending, traffic, sentiment, elevated promotions, and moderating growth in China. Bernstein analyst Aneesha Sherman framed the key question as whether Lululemon has a fixable product issue or a longer-lasting brand problem.
There are still some bright spots. China Mainland revenue rose 30% to $478.4 million in fiscal Q1, and Lululemon opened its largest APAC store in Harajuku, Tokyo, on August 31. The company also combined China and APAC operations under one regional leadership structure. Newer away-from-body products, including wide-leg styles, are gaining traction, and management is increasing replenishment of items that sell well.
Still, the turnaround now has to prove those early successes can restore traffic and full-price demand. Lululemon now plans about 35 new stores this year rather than 40, and its annual revenue forecast has been cut sharply from the previous $11 billion to $11.15 billion range. Board-level pressure is also rising: founder Chip Wilson reached a cooperation agreement that added new directors, including Marc Maurer, former co-CEO of On Holding. Director Charles V. Bergh also bought 4,275 shares at $117.05, totaling roughly $500,000.
