Full Breakdown
Lululemon’s Sales Slump Deepens as New CEO Heidi O’Neill Takes Charge
By Drooid · · How we work
Core Event: Declining Sales and a New Leader
In April, Lululemon Athletica announced that former Nike senior executive Heidi O’Neill would become CEO in September. Within the five-month interim, the company reported a 12% drop in comparable sales in North America and a 20% plunge in leggings sales, the category that drives most of its revenue. The firm also cut its full-year outlook for the second time in three months, prompting analysts to question whether O’Neill can reverse the trend.
Background & Context
Lululemon’s revenue grew sixfold from 2013 to 2025, reaching $11 billion, largely on its signature leggings and yoga apparel. To sustain growth, the brand expanded into footwear, parkas and skirts, moving into direct competition with established apparel and running-shoe makers. This diversification, analysts note, diverted focus from the “innovative, technical activewear” that originally defined the brand and coincided with a rise in discount-bin inventory.
Data & Statistics
- Leggings sales: down 20% YoY.
- North American comparable sales: down 12% in the latest quarter.
- Market share: fell 10 percentage points to 43% (Fortune, citing M Science).
- Share price: down 80% from its December 2023 record; the stock has slumped 52% this year.
- Competitor gains: Alo and Vuori captured 5.9% and 2.2% of market share, respectively, in August.
- BMO price target: $70, implying a 29% decline from the recent close of $98.97.
- Consensus EPS 2027: $9.67 versus BMO’s forecast of $6.35.
Official Statements & Responses
She framed the turnaround as an “incredible opportunity” to re-establish Lululemon’s identity. The firm projects pruning the assortment, focusing on high-margin items such as the $110 leggings line, and potentially cutting prices or liquidating inventory to revive demand.
Criticism & Opposition
Founder and former CEO Chip Wilson has publicly criticized O’Neill’s appointment, suggesting she may repeat the board’s “failed” strategy. Analyst Simeon Siegel (Guggenheim Securities) warned that brands that “stretch” lose brand equity, leading to profit declines. GlobalData managing director Neil Saunders described the current assortment as “incredibly boring” and cited an “absence of good technical innovation” as a key factor in the brand’s loss of heat.
Conflicting Reports & Gaps
Analyst price targets diverge: BMO’s $70 target contrasts with the Bloomberg-compiled average of about $100. While BMO forecasts EPS of $6.35 for fiscal 2027, the Bloomberg consensus expects $9.67. The article does not provide a timeline for O’Neill’s strategic initiatives, leaving the pace of any turnaround uncertain.
Verbatim Quotes
- “I truly believe that we have an incredible opportunity in front of us: to re-establish who we are at our core and, from that foundation, take Lululemon into its next chapter,” — Heidi O’Neill, Nike senior executive
- “You have these brands that stretch; they lose that brand equity. They’re able to sell a lot, but not mean a lot. And so, what that means is you watch the profits go down,” — Simeon Siegel, Guggenheim Securities
- “The $110 legging business is their bread and butter; it’s why their margins are so high,” — Kelly Crago