Lululemon's new CEO faces sales slump and brand challenges

Heidi O'Neill became Lululemon's new CEO on September 8, inheriting a brand with sharply declining sales. The athleisure giant reported a nine percent drop in comparable sales for its second quarter, with revenue in the US falling 12 percent.

Lululemon has lowered its full-year expectations and will open fewer stores than planned. The company now expects to open 35 net new stores in 2026, down from a previous target of 40. It also plans to operate about 40 pop-up locations, compared to 65 at the end of last year.

Analysts pinpoint core problems

Retail analysts argue the sales slump points to deeper branding and product issues. Neil Saunders, managing director at GlobalData, told Inside Retail that things have gone from bad to worse. He attributed the losses to a boring product assortment, a surplus of non-core items, and a lack of meaningful technical innovation. Saunders said pricing had worsened these problems, as consumers are increasingly unwilling to pay a premium for products they see as mediocre.

Bethany Paris Ramsay, a retail brand strategist, said Lululemon's challenge is compounded by intense competition. Brands like Alo Yoga and Vuori have built highly recognisable worlds, offering consumers more choice at nearly every price point. "Lululemon remains enormously well known, but awareness and relevance are not the same thing," Ramsay said.

She noted that reducing store openings is a sensible response but will not fix the underlying problem if consumers are less excited about what is already inside the stores.

A worrying geographic trend

Previously, strong international results had partially masked the brand's underperformance in its core Americas market. That buffer is now fading. Americas revenue declined three percent in Q1 and eight percent in Q2. International comparable sales also moved into decline this quarter.

Saunders said this is extremely worrying. "We also believe that some of the problems from home are now starting to manifest themselves in lower growth overseas." he told the publication.

The path to a turnaround

That new CEO Heidi O'Neill's first priority must be restoring the brand's product innovation and cultural relevance. Ramsay said O'Neill should begin with a close examination of whether Lululemon's product assortment, fit, quality, pricing, and storytelling still meet consumer expectations, particularly in the women's business that built the brand.

"Heidi O’Neill’s first priority should be restoring clarity around what Lululemon uniquely owns," Ramsay said. She argued the brand needs a sharper pipeline of recognisable and technically credible hero products to give customers a reason to return.

Barney Stacher, CEO of consultancy Retail OCD, agreed that reducing stores is not enough. "Fewer doors will not solve the problem if the merchandise behind the doors is not creating excitement," he said. Stacher told Inside Retail that O'Neill's priority should be rebuilding the product engine by simplifying the assortment, accelerating development, and restoring quality confidence.

Both consultants warned against turning Lululemon into "Nike in yoga pants." While O'Neill's experience building Nike's women's business could be valuable, they stressed Lululemon's advantage has always been its distinctive blend of technical credibility, community, and human-scale retail. Stacher said the turnaround will be measured by whether customers once again feel they need to see what Lululemon has created next.