Lululemon forecasts softer 2026 amid demand strains, expects to offset tariff hit
Sign up now: Get ST's newsletters delivered to your inbox
Lululemon has been grappling with a lack of design freshness, softer customer spending and competition.
PHOTO: REUTERS
- Lululemon forecasts lower than expected 2026 revenue and profit, grappling with design freshness and competition.
- The company aims to offset US$380 million in US import tariffs, up from US$275 million in 2025, by reducing markdowns and boosting full-price sales in North America.
- Lululemon appointed Chip Bergh to its board amid founder Chip Wilson's criticism and proxy fight, while seeking a permanent CEO after Calvin McDonald's departure.
AI generated
BENGALURU - Lululemon forecast 2026 revenue and profit below analysts’ estimates on March 17 and said it expects to offset “almost all” of the US import tariff impact as it looks to reduce markdowns and boost more full-price sales.
The company, known for its pricey leggings and athleisure clothing, has been grappling with a lack of design freshness, softer customer spending and competition from larger rivals such as Nike and upstarts, including Alo Yoga and Vuori.
“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, SKU (stock keeping unit) reduction and rebalancing the inventory levels,” interim co-chief executive and chief financial officer Meghan Frank said on a post-earnings call.
The athletic apparel maker is searching for a permanent CEO after Calvin McDonald’s departure in December, while also navigating a proxy fight by its founder Chip Wilson, who has increasingly criticised the board’s strategic direction and its handling of CEO succession.
Lululemon expects annual revenue to be between US$11.35 billion and US$11.5 billion (S$14.7 billion), compared with analysts’ average estimate of US$11.52 billion, according to data compiled by LSEG.
It forecast annual profit of US$12.10 to US$12.30 per share, below expectations of US$12.58.
“It is still early in the year, and it makes sense for Lululemon to guide low, especially since it doesn’t have a permanent CEO in place,” Morningstar analyst David Swartz said.
Sustained weakness in athletic apparel and footwear across all across every income cohort and age group, alongside renewed inflation concerns and wobbling consumer confidence, adds pressure for a brand at Lululemon’s price point, Consumer Edge analyst Michael Gunther said.
Lululemon shares were down about 1 per cent in extended trading. They have fallen roughly 23 per cent so far in 2026.
The company, which relies on China for sourcing and manufacturing, said its forecast reflects a gross US import tariff impact of about US$380 million, up from US$275 million in 2025.
Its gross margin decreased 550 basis points (bps) during the fourth quarter, with a 520 bps impact from US import tariffs.
Yet, the company beat analysts’ expectations for the crucial holiday quarter, as well as exceeded its January preliminary update, supported by a 17 per cent jump in international revenue.
Board changes
Lululemon said on March 17 it has appointed former Levi Strauss CEO Chip Bergh to its board, and that Mr David Mussafer would not stand for re-election following his current term.
Mr Wilson, who owns 4.27 per cent of the company, had earlier questioned Mr Mussafer’s re-election, citing a conflict of interest as he oversees the process to interview board nominees.
The founder had also nominated three independent directors to the company’s board and called for annual board elections. REUTERS
