Lululemon Athletica (LULU) has been one of the market’s biggest laggards this year, with LULU stock down more than 50% year-to-date (YTD). The athletic apparel and footwear retailer is also trading 57% below its 52-week high of $225.98.
Several factors have contributed to the sharp decline, including weaker sales in key markets, tougher competition, and product launches that have failed to generate the expected momentum. Although the steep selloff has brought Lululemon’s valuation multiples down considerably, most Wall Street analysts still aren’t backing LULU stock. Their continued caution suggests that a meaningful rebound in shares may still be some distance away.
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www.barchart.com Lululemon Continues to Struggle
Lululemon’s business challenges have persisted into 2026, prompting the company to revise its full-year outlook downward. This indicates that the company's challenges are not confined to a single market or sales channel, but instead reflect broader weaknesses in consumer demand, product momentum, and operating efficiency.
In the second quarter, revenue fell 4% year-over-year (YOY) to $2.4 billion. Comparable-store sales also declined 10% on a constant dollar basis, reflecting softer demand within the company’s existing retail base.
North America continued to represent Lululemon’s most significant area of weakness. Regional revenue declined by 8%, while comparable sales fell 12%. The deterioration was evident across both major markets, with U.S. revenue down 8% and Canada revenue down 11%. In mainland China, reported revenue rose 4% but comparable sales contracted 8%.
The weakness was also evident across Lululemon’s distribution channels. Revenue from physical stores declined 6%, while digital revenue also fell by 6%.
Brand perception was a problem for Lululemon in Q2. The firm has faced criticism across media channels, which has affected customer traffic. Management has acknowledged that consumer reactions to recent product launches have been inconsistent. Given the importance of product innovation in maintaining customer interest in the premium athletic-apparel segment, weaker product acceptance is making it harder for the company to restore sales momentum in its two largest markets. Meanwhile, its Middle Eastern franchise operations continue to be affected by geopolitical instability, while weaker tourism in parts of Europe has further dragged on demand.
Lululemon’s profitability has come under pressure as declining sales have been accompanied by higher markdown activity. Increased discounting indicates the company is trying to stimulate demand and reduce inventory in a more competitive retail environment. At the same time, ongoing investment in stores, geographic expansion, and product assortment, together with elevated fulfillment costs, has increased the company’s cost base.
Overall, Lululemon’s recent performance points to a combination of demand weakness, declining comparable sales, uneven product reception, and rising cost pressures.
Challenges Persist for Lululemon
Although management has taken several initiatives to stabilize the business and restore growth, these measures are unlikely to deliver financial benefits immediately. The company’s near-term outlook remains constrained by weak demand, particularly in North America, suggesting that the second half of the year could see continued pressure on both revenue growth and profitability.
For Q3, revenue is projected to decline by 10% to 11%, with North American revenue expected to decrease in the mid-teens. Meanwhile, China and other markets are expected to show some improvement.
Profitability is also expected to deteriorate materially. Gross margin is projected to decline by approximately 250 basis points year-over-year (YOY). Although improvements in product margins could provide some support, these gains are expected to be outweighed by continued spending on store openings, store optimization, and distribution infrastructure. Similarly, Q3 EPS is expected to decline sharply to approximately $0.93 to $0.98, compared with $2.59 in the prior-year period.
Looking beyond the quarter, the full-year outlook points to a decline in both revenue and earnings.
What Do Analysts Think of LULU Stock?
Weaker North American demand, increased competition, continued margin compression, and elevated investment spending suggest Lululemon’s recovery will take time. Against this challenging backdrop, analysts expect earnings to decline by more than 32% in fiscal 2027.
These concerns have contributed to a cautious view among Wall Street analysts. Based on 32 analysts with coverage, LULU stock has a consensus “Hold” rating.
www.barchart.com The Key Takeaway
Overall, Lululemon’s sharp decline has made its valuation more attractive, but LULU stock still faces significant fundamental headwinds. Weak North American demand, inconsistent new-product performance, margin pressure, and declining earnings suggest a recovery is unlikely in the near term.
Until there is clearer evidence of improving sales momentum and profitability, investors shouldn’t rush to buy Lululemon stock.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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