Lululemon stock drops after outlook cut
Tomas Kauer 
Lululemon Athletica Inc. ’s share price slumped further on Friday after the company cut its outlook on “spikes” of negative public attention and product releases that fell short of expectations.
On a Thursday call with analysts, Lululemon interim co-chief executive and chief financial officer Meghan Frank said the company “faced a few headwinds and a moderating sales trend” toward the end of the first quarter, which ended May 3.
“First, we experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top line performance,” Frank said. “And second, not all of our product launches have met our expectations.
The Vancouver-based retailer recently settled a five-month proxy fight with its founder Chip Wilson , who left the company in 2015 and has frequently criticized the brand’s management, strategic direction and lack of product innovation for a decade after leaving the company. He launched a public campaign at the end of December to reshape its board of directors.
The two sides announced a cooperation agreement on May 27 that will see two of Wilson’s nominees join the board after Lululemon’s annual meeting in June. Wilson, who is no longer directly involved with the retailer but owns an 8.7 per cent stake, agreed not to publicly disparage Lululemon for 18 months.
Lululemon previously reported it spent US$5 million on expenses related to the proxy contest in 2025 and expected to incur more one-time costs this year.
“We are pleased that some of the recent distractions have been removed, and we remain sharply focused on returning the business to a position of strength in North America,” Frank said on the call with analysts.
Lululemon’s share price has shed more than 60 per cent of its value over the last year as the company weathered several other headwinds, including U.S. tariffs and the end of the de minimis duty-free shipping loophole; the departure of former CEO Calvin McDonald and slowing sales in North America.
Several product missteps and growing competition in the athleisure space added to its struggles. Frank said the company is continuing to work on shortening its product development timeline to respond to customer trends and restock best-selling styles faster.
On Thursday, the company reported first-quarter net revenue increased four per cent year over year to US$2.5 billion, coming in above analysts’ forecasts of US$2.4 billion.
Net income for the quarter was US$195 million, down from US$314 million a year ago. Diluted earnings per share were US$1.69, down from US$2.60 per share last year and just above analysts’ expectations of US$1.67 per share.
Based on the underperforming product launches and negative media commentary reducing customer traffic, Frank said second-quarter net revenue is expected to decline two per cent to three per cent to between US$2.45 billion to $2.475 billion.
Lululemon also downgraded its guidance for fiscal 2026 and said it now expects net revenue to decline between zero and one per cent to between US$11 billion and $11.15 billion.
Previously, the company forecasted full-year net revenue to grow two per cent to four per cent, in the range of US$11.35 billion and US$11.5 billion.
Net revenue in the Americas declined three per cent in the first quarter to US$1.6 billion. In North America, where Lululemon generates most of its sales, net revenue was down three per cent in Canada and four per cent in the United States.
Net revenue climbed 30 per cent to US$478 million in mainland China, which accounts for 19 per cent of Lululemon’s sales and is one of the retailer’s most important drivers of growth. Net revenue in the rest of the world was up 13 per cent to US$372 million.
Comparable sales, a key growth metric that includes net revenue from online sales and established stores that have been open for at least 12 months, increased one per cent.
Frank and chief commercial officer André Maestrini will soon wrap up their stint as interim co-chief executives. Lululemon’s incoming CEO, former Nike Inc. executive Heidi O’Neill , will start her new job in September during the company’s third quarter.
“André and I both spent time with Heidi,” Frank said. “It is clear to me she has a true passion for the Lululemon brand, a deep understanding of product excellence, extensive experience driving growth and transformation at scale, and will be a strong leader for our organization.”
The company’s stock fell more than 13 per cent in pre-market trading on Friday.
• Email: jswitzer@postmedia.com
