Lululemon Projects Slower 2026 Sales Growth Amid North American Challenges
Lululemon Athletica Inc., the Vancouver-based activewear retailer, has issued a cautious outlook for 2026, forecasting revenue growth that falls short of analyst expectations while navigating multiple headwinds in its key markets. The company expects full-year 2026 revenue to increase between two percent to four percent, translating to a range of US$11.35 billion to US$11.5 billion. This projection is slightly below the average analyst estimate of US$11.52 billion, signaling a period of moderated expansion for the athleisure giant.
North American Market Pressures
In a significant development, Lululemon anticipates both North American and U.S. revenue to decline by one to three percent in 2026. This forecast comes amid slowing growth in the United States, which accounts for the majority of the company's sales. The challenges stem from increased competition within the athleisure sector, weaker consumer spending patterns, and recent customer complaints regarding product quality. These factors have collectively dampened performance in what has traditionally been Lululemon's strongest market.
Meghan Frank, Lululemon's interim co-chief executive and chief financial officer, acknowledged these difficulties during a recent analyst call. "We recognize there is more work to be done, and we have been course-correcting on a number of fronts," Frank stated. "But we are encouraged by the guests' response to our recent new product drops and activations."
Recent Financial Performance
The company's latest earnings report reveals a mixed financial picture. For the fourth quarter of fiscal 2025, which concluded on February 1, net revenue increased by one percent year-over-year to US$3.6 billion. For the entire fiscal year, net revenue grew five percent to reach US$11.1 billion. However, net income for the quarter declined to nearly US$587 million, down from US$748 million during the same period the previous year.
Diluted earnings per share stood at US$5.01 for the quarter, surpassing analysts' expectations of US$4.78 per share but remaining below the US$6.14 per share reported a year earlier. In Lululemon's crucial North American market, net revenue showed divergent trends with three percent growth in Canada contrasted by a one percent decline in the United States.
Strategic Adjustments and Leadership Changes
Frank outlined several strategic priorities aimed at improving North American performance. "A top priority for the management team as we enter the year is returning to full-price sales growth in North America through a series of steps that include the inflection of product newness and reducing the level of markdowns, skew reduction, and the rebalancing of inventory levels," she explained.
The company expects markdown levels to improve modestly for the full year following higher discount activity in 2025, with year-over-year decreases anticipated to materialize in the second half of 2026. Leadership changes are also underway, with Frank and chief commercial officer André Maestrini serving as co-CEOs following Calvin McDonald's departure on January 31. Frank confirmed that a "robust" search for a new permanent leader is currently in progress.
International Growth Opportunities
While North America presents challenges, Lululemon continues to experience strong growth internationally. Mainland China, now the company's second-largest market and a key growth driver, represents fifteen percent of total revenue. Fourth-quarter net revenue in the region reached US$528 million, reflecting a twenty-one percent year-over-year increase on a constant dollar basis, or twenty-eight percent when excluding revenue from the fifty-third week in 2024.
Frank emphasized the company's dual focus: "We know we must improve our performance in North America while continuing our momentum internationally." This balanced approach will be critical as Lululemon navigates U.S. tariffs, lagging North American sales, and an ongoing proxy battle with its founder, Chip Wilson, who has publicly criticized the board for what he termed a "total operational failure" in recent product launches.
The company's forward-looking statements reflect both the challenges of maintaining market leadership in a competitive landscape and the opportunities presented by international expansion. As consumer preferences evolve and economic conditions fluctuate, Lululemon's ability to execute its strategic corrections will determine its trajectory through 2026 and beyond.
