Lululemon, long celebrated for its innovative designs and once-unshakable ability to surprise consumers, has reached a moment of stark self-awareness: the company recognizes it has lost much of its element of surprise. During an earnings call on Thursday, Chief Executive Officer Calvin McDonald spoke candidly about the brand’s current struggles, pointing out that customers no longer show the same enthusiasm for newly released colors and that certain product categories have grown stagnant. McDonald acknowledged that the organization has extended the life cycles of many products well beyond their optimal period, particularly within core collections that target lounge and social wear. According to him, this overextension led to a troubling uniformity and predictability in its casual apparel, thereby causing the company to miss opportunities to introduce innovative trends that might have reinvigorated customer interest.
He elaborated further, admitting that the brand failed to maintain a healthy equilibrium between tried-and-true offerings and the introduction of fresh, contemporary designs across its more relaxed product ranges. As a result, consumer response—once reliable and enthusiastic—has measurably declined. This admission comes despite the company exceeding analysts’ profit expectations for the second quarter. Net revenue rose 7% year-over-year, reaching $2.5 billion, yet overall profit fell by 5.6%, coming in at $370 million. The financial discrepancy underscores the disconnect between topline growth and the underlying operational challenges the company currently faces.
Beyond the issue of predictable product assortments, McDonald highlighted other external pressures weighing on the company’s performance. He emphasized that shoppers are spending less overall on apparel, and within the shrinking pool of apparel purchases, performance activewear—the category that was once Lululemon’s stronghold—is capturing a smaller share of consumer wallets. Moreover, today’s customers are increasingly discerning, often holding out for genuinely innovative and style-forward pieces rather than accepting incremental variations on what they already own. Compounding these demand-side challenges are geopolitical and trade-related factors: McDonald cited the impact of U.S. tariffs and the elimination of the de minimis provision as significant contributors to the downward adjustment in Lululemon’s full-year guidance. The company now anticipates that tariffs alone may reduce annual profits by an estimated $240 million.
The market responded harshly to these revelations, with Lululemon’s stock plummeting by more than 15% in after-hours trading on Thursday. Year-to-date, the stock has already declined over 46%, starkly illustrating investor unease about the brand’s trajectory. Industry analysts are similarly skeptical. In a July research note, Jefferies analysts warned that Lululemon risks diluting its once tightly defined identity by edging into a mass-market space, drawing comparisons to the Gap. While the company originally forged its reputation by offering high-quality yoga apparel, it now sells an increasingly broad and sometimes unfocused assortment of products. This expansion, according to analysts, may ultimately erode the clarity and aspirational quality of its brand.
Their evaluation, which focused on two U.S. store locations, described collections overwhelmed by bold, sometimes jarring tones and oversized logos designed to broaden appeal beyond the brand’s established base. Analysts remarked that certain displays appeared to rely on a “Sesame Street”-like palette, a reference to the children’s program renowned for its vivid and contradictory hues. Furthermore, the proliferation of promotions was seen as another sign of operational stress: Jefferies counted more than 1,000 discounted items on Lululemon’s e-commerce platform at the time of the review, a volume that strongly suggested markdowns were being used to address sluggish sell-through rates and excess inventory.
Still, McDonald sought to reassure stakeholders by outlining a definitive plan for revitalization. Among the most immediate changes, Lululemon will increase the proportion of entirely new designs within its overall mix, raising them from 23% of total offerings to approximately 35% by next spring. This adjustment is intended both to accelerate novelty and reduce the sense of sameness that currently pervades the brand’s casual collections. Additionally, the company intends to reinterpret some of its most iconic, high-performing products by giving them what McDonald called a “fresh perspective,” thereby making timeless items feel renewed without abandoning their essence. Speed to market will also become a strategic priority, with the goal of delivering innovative products into customers’ hands more rapidly than before.
Despite the seriousness of the challenges, McDonald emphasized confidence in the brand’s enduring strength. He underscored that Lululemon continues to enjoy extraordinary customer loyalty, with a community of consumers who respond enthusiastically when the company introduces genuinely original and inventive styles. In his view, this foundation provides reassurance that the path forward is not only achievable but may also allow the company to exceed evolving customer expectations. His conclusion was clear: while Lululemon must address missteps and refine its strategy, it remains poised to reestablish its reputation as a dynamic, trend-defining leader in the highly competitive activewear market.
Sourse: https://www.businessinsider.com/lululemon-ceo-earnings-new-products-colors-trends-consumer-spend-behavior-2025-9
