TLDRs;
- Lululemon stock drops after 2026 guidance misses analyst expectations despite strong Q4 results.
- CEO search and board proxy fight weigh on investor confidence amid competition.
- U.S. revenue declines and tariff pressures hurt profitability and gross margins.
- International sales growth offers hope, but U.S. challenges persist for Lululemon.
Lululemon (NASDAQ: LULU) reported a fourth-quarter performance that exceeded Wall Street expectations, but the good news failed to lift investor sentiment. The company posted $3.64 billion in revenue, a 1% increase from the prior year, alongside a diluted earnings per share (EPS) of $5.01. Comparable sales rose 3%, signaling modest growth across the business.
Despite these gains, North American revenue slipped 4%, offset by a 17% jump in international sales. The results underscore the company’s uneven performance across markets, as executives try to stabilize its core U.S. business. Analysts had anticipated $3.62 billion in revenue and an EPS of $4.98, meaning Lululemon beat expectations, but not enough to offset concerns about its future trajectory.
Weak 2026 Outlook Sparks Stock Decline
The company’s guidance for fiscal 2026 fell short of analyst predictions. Lululemon projects revenue between $11.35 billion and $11.50 billion and EPS in the $12.10 to $12.30 range, missing expectations of $11.51 billion in revenue and $12.58 EPS. For the first quarter, Lululemon anticipates revenue of $2.40 billion to $2.43 billion and EPS of $1.63 to $1.68.
Lululemon Athletica Inc., LULU
The subdued outlook pushed shares lower after hours, reflecting investor caution. The company faces mounting competition from rivals such as Nike, Alo Yoga, and Vuori, and concerns about slowing U.S. demand and reliance on markdowns have heightened market skepticism.
Leadership Moves and Board Changes
Adding to the company’s complex situation, former Levi Strauss CEO Chip Bergh joined Lululemon’s board, signaling an effort to bring experienced leadership during a turbulent period. Bergh is set to take over the seat from David Mussafer at the 2026 annual meeting. Marti Morfitt, board chair, described Bergh as an “industry leader,” while Bergh called the timing “pivotal.”
Meanwhile, Lululemon continues a CEO search following Calvin McDonald’s departure in January, and founder Chip Wilson is pursuing a proxy fight by nominating three directors. These leadership developments are closely watched by investors, who view board stability as critical for executing the company’s turnaround strategy.
Profitability Challenges and Future Outlook
Profitability declined as gross margins fell 550 basis points to 54.9%, with U.S. import tariffs contributing to higher costs. Inventory finished the year at $1.7 billion, up 18% from the prior year, emphasizing the company’s need to manage stock levels efficiently. Interim co-CEO Meghan Frank highlighted improving “full-price sales,” particularly in North America, as a top priority moving forward.
While international sales are providing some relief, lingering weakness in U.S. demand, continued tariff pressures, and an unresolved board dispute during the CEO search remain obstacles. Executives hope that new product launches and enhanced customer experiences will eventually drive growth, but the stock faces a challenging path in the near term. Lululemon shares have already declined roughly 23% this year and are near a six-year low, down almost 52% from a year ago.
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