On September 4, 2026, Reuters reported that lululemon athletica inc. (NASDAQ:LULU) cut its full-year revenue and profit forecasts for the second time this year, days before incoming CEO Heidi O’Neill, a former Nike executive, takes over on September 8.
The company now expects fiscal 2026 revenue of $10.35 billion to $10.5 billion, down from a prior forecast of $11.0 billion to $11.15 billion, after second-quarter revenue fell 4% to $2.42 billion and comparable sales dropped 9% globally. Shares tumbled 18% to an eight-year low, extending the stock’s decline this year to roughly 52%, according to Reuters.
Bull Case
lululemon athletica inc. (NASDAQ:LULU) still has a valuable brand and an experienced incoming CEO who could address its product problems. Heidi O’Neill will take over on September 8 after spending decades in athletic apparel at Nike, where she helped grow the women’s apparel business. Her experience in product development and direct-to-consumer operations gives Lululemon relevant leadership expertise as it works to regain customer interest.
International growth gives Lululemon another path to offset weakness in North America. International revenue increased 4% in the quarter even as Americas revenue fell 8%. The positive international performance shows the brand still has room to grow outside its main market and gives the new CEO another source of revenue growth while she works to rebuild the North American business.
Lululemon has financial resources to fund a turnaround since the company held $1.4 billion in cash and equivalents at the end of the second quarter. It gives O’Neill flexibility to invest in product development, marketing, and other initiatives while she works to restore growth. The stock also trades at about 11.5 times forward earnings, below Nike’s 20.76 times and Adidas’ 13.41 times, which leaves room for a valuation recovery if management can stabilize the business.
Bear Case
lululemon athletica inc. (NASDAQ:LULU)’s sales deterioration has become broad and persistent. Americas revenue fell 8%, global comparable sales declined 9%, and leggings sales dropped about 20% in the second quarter. Management also cut its full-year revenue forecast to a 5% to 7% decline and expects another 10% to 11% revenue decline in the third quarter, suggesting the new CEO will inherit a business that could weaken further before it improves.
Lululemon continues to lose market share to well-funded competitors. M Science data showed Lululemon’s athleisure market share fell 10 percentage points to 43.9% in August, while Alo Yoga gained 5.9 percentage points and Vuori gained 2.2 percentage points. If Lululemon cannot develop products that reconnect with consumers, competitors could continue taking share and make the turnaround more difficult.
The company’s cost structure could limit the benefits of any recovery. Lululemon increased store square footage by 11% in the second quarter even as sales declined, leaving the company with a growth-oriented cost base that does not match its weaker revenue outlook. The reported 60.5% gross margin also benefited from $134.5 million in tariff refunds and $4.1 million in related interest, making the underlying margin performance less encouraging.
Hedge Fund Sentiment
Hedge funds have been retreating from lululemon athletica inc. (NASDAQ:LULU) well ahead of this latest guidance cut: holders fell to 51 in the second quarter from 61 in the first, and the combined position value nearly halved to $612 million from $1.14 billion, according to Insider Monkey’s database. Nike saw a similar decline in holder count, down to 56 funds from 71, though its position value held up better, rising slightly to $1.35 billion from $1.31 billion.
Conclusion
Lululemon’s strong brand, international growth, and incoming CEO Heidi O’Neill’s athletic-apparel experience give the company a path to recover from its current sales slump. Nonetheless, declining leggings sales, market-share losses, and a cost structure built for growth could make the turnaround lengthy and expensive. Investors should see whether O’Neill can restore product momentum and customer demand quickly enough to reverse the company’s declining revenue and earnings outlook.
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