Lululemon Athletica Inc. has lowered its forecast for the year ahead, saying it now expects revenue to be flat or fall slightly, as the embattled athleisure giant faces “headwinds” that are hurting sales.
The Vancouver-based apparel retailer on Thursday said it now expects its net revenue in fiscal 2026 to be between roughly US$11-billion to US$11.2-billion, which would represent declines of zero to 1 per cent compared to the prior year.
While Lululemon had a “solid” start to the year, interim co-chief executive officer Meghan Frank wrote in a statement, more recently the company has “been navigating headwinds that have led us to adjust our outlook for the full year.”
On a call to discuss Lululemon’s first-quarter earnings, Ms. Frank referred to product launches that did not meet the company’s expectations, as well as negative commentary in the media that hurt its image and sales.
“I want to emphasize that we are not sitting still,” she said on the call, saying that the executive team is working to strengthen its product designs, to cut the time it takes to bring new products to shelves, and to improve performance.
The news adds to the urgent problems that the company’s new CEO, long-time Nike executive Heidi O’Neill, will have to address when she joins Lululemon in September. Lululemon had previously signaled that in the coming fiscal year, it expected revenue growth of 2 to 4 per cent, driven by its international markets, as North American sales will continue to drop slightly.
In recent years, the company that helped to invent the athleisure category has been seriously stretched. While sales have been growing internationally, its performance has slipped in North America, its biggest market. The sagging performance had led to a public fight with the company’s founder, Chip Wilson, which was recently resolved after Lululemon agreed to appoint two of the three nominees Mr. Wilson had pushed to be added to its board of directors.
In its first quarter ended May 3, Lululemon reported that comparable sales – an important metric that tracks sales growth in existing stores, rather than growth from opening new locations – increased by 8 per cent internationally on a constant dollar basis, but fell by 6 per cent in North America on a constant dollar basis.
Overall, the company’s net revenue increased to US$2.5-billion, up 4 per cent in the quarter compared to the same period last year.
Net income fell significantly to US$195-million or US$1.69 per share, compared to US$314.6-million or US$2.61 per share in the first quarter last year.
Ms. Frank emphasized that Lululemon sold fewer items on discount in North America in the first quarter than it had been in previous months, among the “positive signals” for the business in the all-important market where it is struggling to improve. But the company’s work to gain traction with customers who have fallen away from the brand will take time to take effect, co-CEO André Maestrini said.
