Lululemon recently disclosed a disappointing outlook for 2026, highlighting ongoing challenges such as tariffs, rising costs, and a contentious proxy battle with its founder, Chip Wilson. The company’s forecast for both the first quarter and the fiscal year fell short of Wall Street expectations, intensifying concerns about its future profitability.
For the first quarter of the year, Lululemon anticipates sales between $2.40 billion and $2.43 billion, below analyst estimates of $2.47 billion. Additionally, the company’s earnings per share (EPS) guidance of $1.63 to $1.68 also falls short of the projected $2.07. The fiscal year outlook is similarly disheartening, with expected sales ranging from $11.35 billion to $11.50 billion, compared to the anticipated $11.52 billion. The earnings outlook of $12.10 to $12.30 per share also missed estimates of $12.58.
Interim co-CEO Meghan Frank spoke about ongoing efforts to improve the company’s trajectory in a CNBC interview, stating, “The work is really underway in terms of our action plan, and we’re really focused on the importance of course correcting on a number of fronts.” Despite challenges, she expressed optimism about new product lines and a shift to reduce the speed to market timeline, suggesting some early signs of positive momentum.
During the recently completed fiscal fourth quarter, Lululemon outperformed estimates on both revenue and earnings, although expectations had been adjusted downward prior to the report. The retailer posted earnings of $5.01 per share, surpassing estimates of $4.78, and total revenue of $3.64 billion, exceeding expectations of $3.58 billion. However, this represented a decline in net income from $748.4 million, or $6.14 per share, a year earlier.
The brand, known for its premium positioning, has started utilizing discounts more frequently to boost sales—an approach it plans to scale back in favor of returning to a full-price business model. However, this transition may negatively impact immediate sales numbers. Higher tariffs and the conclusion of the de minimis exemption are significant costs, with Lululemon forecasting tariffs to cost the company around $380 million this year, a sharp increase from $275 million last year.
In light of the ongoing proxy fight with Wilson, who has raised concerns over the company’s creative direction and board dynamics, Lululemon recently announced the addition of Chip Bergh, former CEO of Levi Strauss, to its board. His experience in steering Levi’s toward a profitable direct selling strategy could potentially offer fresh insights. Meanwhile, board member David Mussafer will not seek re-election, an outcome applauded by Wilson, who has been vocal about the board’s performance and strategic direction.
Certain aspects of Lululemon’s business continue to grow, particularly in China and other international markets, which, while still a small part of total revenue, show promise. However, same-store sales in the Americas, the company’s largest region, have stagnated for nearly two years, and declines are expected to continue into 2026, projecting a drop of 1% to 3%.
In contrast, sales in China are anticipated to grow by around 20%, while other regions may see mid-teens percentage increases. The retailer faces a challenging road ahead as it navigates these market pressures, works to revamp its product offerings, and seeks to restore investor confidence amid ongoing scrutiny from stakeholders.
