Lululemon’s high-growth, high-premium brand narrative is no longer a viable option. Following the release of its latest financial report, its stock price continued to come under pressure. On September 15th, Lululemon’s stock price hit a six-year low of $159.252 per share, closing at $159.98 per share, with a total market capitalization of $18.971 billion. According to statistics, Lululemon’s stock price has fallen by approximately 60% this year and is nearly 70% below its historical high at the end of 2023.
North American Sales Hit by Tariffs
According to Lululemon’s latest figures for the second quarter of fiscal year 2025, ending August 3rd, the company reported a 7% year-over-year increase in global net revenue to $2.5 billion, with international net revenue increasing by 22%. Gross profit increased by 5% year-over-year to $1.5 billion, with gross margin declining by 110 basis points to 58.5%. Diluted earnings per share were $3.10, compared to $3.15 in the same period last year.
Faced with the dual pressures of tariffs and sluggish sales in North America, Lululemon has again lowered its earnings guidance. Meghan Frank’s latest forecast indicates that its full-year net revenue for fiscal 2025 will be between $10.85 billion and $11 billion, lower than the previous forecast of $11.15 billion to $11.3 billion and below the market consensus of $11.2 billion.
Lululemon’s downward revision stems from sluggish growth in its traditional core North American market. Comparable store sales in the region fell 4% in the second quarter, while store traffic plummeted 8.5% year-over-year. Combined with the impact of tariffs and industry competition, operating pressure in the North American market has intensified. After the U.S. government canceled the tax-free policy for imports below $800, the costs of two-thirds of US e-commerce orders increased. It is understood that 87% of Lululemon’s production capacity is concentrated in Southeast Asia, with Vietnam accounting for 40%, significantly impacted by US tariffs. Lululemon estimates that tariffs will reduce its full-year profit by $240 million. Although Lululemon has attempted to shift production capacity to Mexico, construction of its own factories has been slow, making it unlikely to alleviate the pressure in the short term.
As the performance fell short of market expectations, Lululemon’s stock price plummeted by more than 18% in a single day after the financial report was released. At the same time, it was downgraded by seven analysts, and the proportion of Lululemon’s buy ratings fell to the lowest level since 2024.
China Growth Cools as Fans Lose Interest
Compared to the North American market, Lululemon’s international performance is impressive. Specifically, net revenue in mainland China increased by 25% year-on-year, with comparable store sales soaring 17%, making it Lululemon’s second-largest market globally and its most important growth engine.
However, compared to previous data, growth in the Chinese market is actually slowing. Financial data shows that Lululemon’s revenue in China will increase by 39% year-on-year in the fourth quarter of fiscal 2024, significantly higher than the 25% growth seen in the previous quarter.
Some loyal Lululemon fans have expressed on social media that Lululemon products are “similar in style” and “new styles are lackluster.” Lululemon, which rose to fame with hits like the “Yoga Pants,” is now lacking new hits, and consumer fatigue is naturally waning.
Furthermore, Lululemon’s high pricing has long been criticized, a frequent topic of discussion among industry analysts. Lululemon’s classic Align yoga pants, priced at 850 yuan, have recently sold over 20,000 units. MAIA ACTIVE, which has accelerated its expansion in the Chinese market since its acquisition by Anta, is priced at 399 yuan and has recently sold over 40,000 units.
During a conference call, Lululemon CEO Calvin McDonald admitted that the company’s product life cycles were too long, particularly in its casual and social wear categories, becoming predictable and formulaic. The company also relied too heavily on core products, missing opportunities to create new trends. A recent report indicates that new products currently account for only 23% of its total offerings, leading to a loss of consumer interest in novelty.
Struggles with Aging Line, Single Market
Industry insiders believe that Lululemon’s success stems from its successful exploitation of the niche blue ocean market for high-end yoga apparel. It has built a deep moat through strong social media marketing and brand storytelling, cultivating a large number of loyal users. However, Lululemon currently faces structural issues such as an aging product line and over-reliance on a single market.
From a market perspective, industry competition is no longer a single-dimensional competition; it has become a comprehensive competition encompassing brand power, product innovation, supply chain efficiency, pricing strategy, channel layout, and social media operations. Lululemon must contend with pressure from giants like Nike and Adidas in both the professional sports and fashion sectors. On the other hand, it must be wary of emerging brands like AloYoga and Vuori diverting its core yoga community. Meanwhile, the rise of other high-quality brands is steadily eroding its market share.
As early as 2019, Lululemon released its five-year Power of Three growth plan, planning to expand into multiple sports scenarios and lifestyle areas, including new categories such as tennis, golf, hiking, and footwear. However, it has so far failed to establish a sports appeal to compete with traditional giants such as Nike and Adidas.
