Lululemon slides to multi-year lows as bleak outlook, product missteps cloud brand reset

By Savyata Mishra and Akriti Shah

June 5 (Reuters) – Lululemon Athletica shares dropped 9% in early trading on Friday as the athleisure wear maker cut its annual profit forecast following brand backlash and underwhelming product launches that stoked turnaround worries.

The selloff underscores rising investor concerns over the pace of recovery at the once high-flying yoga wear brand after its proxy fight with founder Chip Wilson and product missteps ahead of former Nike executive Heidi O’Neill taking the helm in September.

The Vancouver-based company, whose leggings cost up to $178, is in the early stages of a turnaround, ramping up discounting on older inventory and revamping marketing as tariffs squeeze margins.

“We gave LULU too much credit for guiding conservatively, and we’re increasingly concerned by weakening U.S. demand over the past 6–7 weeks, especially given it coincided with increased newness that LULU has planned over the last year,” Raymond James analyst Rick Patel said in a note.

Shares of the company opened at $110.43, their lowest since June 2018.

Lululemon attributed the sales weakness in part to a spike in “negative commentary” across media and social platforms, linked to a months-long proxy battle in which founder Wilson sharply criticized the company’s leadership. It also blamed product launches that failed to resonate with its core affluent female shopper.

Wilson, who is one of the biggest independent shareholders of Lululemon, had accused the company of having lost its “cool” factor, with leaders keen to “replicate mass-market, lower quality athletic retailers.”

The negative sentiment has been compounded by stumbles in product innovation, including complaints that its $108 “Get Low” leggings were see-through, alongside earlier issues with fit and design in recent launches.

VALUATION SLIDES

The stock is on track to shed more than $1.2 billion in market value on Friday if losses hold, adding to a bruising 12-month stretch in which shares have lost nearly two-thirds of their worth.

It forecast a drop in second-quarter sales for the first time since the pandemic, prompting at least nine brokerages to cut their price target on the stock. The median PT has fallen to $149 from $205 three months ago.

Growth has also been stifled by newer, fast-growing players in the space such as Alo Yoga, Vuori and Skims in the U.S., even as China remains a bright spot for Lululemon.

For the full year, profit is now expected to slide up to 17% following a 9% drop in 2025 and operating margin is seen contracting 380 basis points to 16.1%, the lowest since 2006, according to brokerage William Blair.

Against this backdrop, attention is turning to incoming CEO O’Neill, with investors closely watching whether she can revive product innovation and restore momentum in the U.S.

“A full strategic reset under the new CEO is required,” Jefferies analysts said.

The company’s valuation multiple has compressed to around 10 times forward earnings, well below 22.85 for Nike and 15.10 for Adidas, according to LSEG data.

(Reporting by Akriti Shah, Kanishka Ajmera and Savyata Mishra in Bengaluru; Editing by Vijay Kishore and Devika Syamnath)