Lululemon Faces Prolonged Recovery as North American Growth Stalls

Lululemon Athletica (NASDAQ: LULU) is grappling with a significant slowdown in its core North American market, contributing to a 45% decline in its share price over the last year. The company is currently battling a combination of waning pandemic-era demand and intensified competition from emerging athletic apparel rivals such as Alo Yoga and Vuori. The company's 'Power of Three x2' strategic plan aimed for total revenues of $12.5 billion by fiscal 2026. However, current projections suggest a miss, with fiscal 2026 revenue expected to grow only 2% to 4%, reaching between $11.35 billion and $11.50 billion. This deceleration is reflected in the company's comparable-store sales growth, which fell to 2% in FY 2025 from 16% in FY 2022. Financial pressure has forced the company to utilize markdowns to stimulate sales, which has diluted its premium brand appeal and compressed margins. Gross margins, which peaked at 59.2% in FY 2024, declined to 56.6% in FY 2025. These headwinds have been further exacerbated by inflation and tariffs. Lululemon is also navigating a leadership transition following the departures of CEO Calvin McDonald and Chief Product Officer Sun Choe. While former Nike executive Heidi O'Neill has been appointed as the new CEO, analysts caution that a recovery in earnings per share (EPS) and revenue—projected to rise 8% and 4% respectively in FY 2027—will require several more quarters of stabilization in the North American business.