Lululemon Slashes Outlook, Raising Pressure on Incoming CEO

NEW YORK, June 4, 2026, 17:02 EDT

Lululemon Athletica lowered its annual sales and profit outlook Thursday. Shares fell roughly 9% after hours as sluggish U.S. demand offset gains abroad. The move leaves the company facing more headwinds, with Lululemon still without permanent top management.

Timing is an issue. Heidi O’Neill, who has spent years at Nike, doesn’t take over as chief executive until Sept. 8. Lululemon only settled its board dispute with founder Chip Wilson last week, which had kept the focus on governance just as sales slowed.

Lululemon cut its 2026 sales outlook. The company now sees revenue for fiscal 2026 in the range of $11.00 billion to $11.15 billion, calling for either a 1% drop or flat sales. Diluted EPS is forecast at $10.95 to $11.15. That’s down from the March forecast of $12.10 to $12.30 a share. The current quarter doesn’t look better. Lululemon expects revenue to fall by 2% to 3%, and earnings per share to come in between $1.76 and $1.81.

Lululemon’s first quarter wasn’t a clear miss. Revenue climbed 4% to $2.47 billion, and earnings came in at $1.69 a share, beating its March guidance. Still, the mix looked rough. Americas net revenue dropped 3% even as international jumped 22%. Comparable sales rose just 1% overall and fell 5% in the Americas.

Margins took a hit. Gross margin slipped 410 basis points to 54.2%. Operating income fell 37% to $276.9 million. A basis point equals one-hundredth of a percentage point.

Lululemon interim co-CEO and CFO Meghan Frank said the company noticed some “positive signals” in North America with stronger full-price sales, but said management cut its outlook because of newer “headwinds.” Interim co-CEO and chief commercial officer André Maestrini put it more plainly: “We recognize that we have more work to do.” Lululemon

Lululemon’s U.S. revenue dropped 4% at constant exchange rates, Reuters said, while sales in China jumped 23% using the same metric. In the U.S., Lululemon faces stiffer competition from Alo Yoga and Vuori, and other athletic brands are a factor in overseas markets too.

That’s the challenge for O’Neill. Lululemon in April said it hired her from Nike, where she spent over 30 years in sport, apparel and footwear. O’Neill said she wants to “accelerate product breakthroughs” and boost the brand’s cultural relevance. That’s a tall order for a stock hit by slower growth and less demand at home. Lululemon

Wilson’s campaign has ended, though it still matters. The May 27 cooperation agreement puts Laura Gentile, ex-chief marketing officer at ESPN, and Marc Maurer, former co-CEO at On, on the board after the 2026 annual meeting. Lululemon will also pick one more director with apparel product and brand experience by Oct. 1.

Lululemon executive chair Marti Morfitt said the deal gives “a clear path forward” for CEO O’Neill and the leadership team. Wilson, who holds around 8.7% of shares, agreed to standstill and non-disparagement terms for about 18 months. Lululemon

Lululemon finished the quarter with $1.5 billion in cash and cash equivalents, giving it some buffer. The company bought back $358.3 million in shares and opened five net new stores, bringing the total to 816. Inventories were up 2% in dollar terms but down 4% by units, suggesting Lululemon isn’t just stacking up unsold goods.

Lululemon’s new outlook comes with caveats. The company said its forecast leaves out possible tariff refunds, any future share buybacks, and does not factor in unknown future impact from tariffs or broader economic trends. Cautious U.S. consumers or slower product launches could limit options for the incoming CEO, even with a strong balance sheet.

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