lululemon's Fresh Styles, Soft Sales: Is Innovation Falling Short?

lululemon athletica inc.’s LULU second-quarter fiscal 2025 underscored the tension between a loyal customer base and shifting consumer demand. While earnings per share of $3.10 topped the Zacks Consensus Estimate, revenues of $2.53 billion fell short, reflecting weak U.S. performance, even as international markets like China delivered double-digit growth.

Comparable sales in the Americas declined, leading management to trim the fiscal 2025 revenue guidance to flat to slightly down in the United States. For a brand that has tripled revenues in six years, the slowdown highlights a more challenging landscape for premium activewear.

The company has been heavily dependent on product innovation to reignite growth. Recent launches, such as the Align No Line, Daydrift and BeCalm, have resonated with customers, reinforcing lululemon’s reputation for high-performance design. However, core casual franchises like Scuba and Softstreme have grown stale, with shoppers showing less enthusiasm for seasonal color updates.

New pipeline additions, including Loungeful, Big Cozy and a refreshed Scuba waffle, aim to inject energy into the assortment. Management’s goal is to lift newness penetration from 23% to 35% by spring 2026, signaling a sharper focus on balancing core staples with fresh designs.

Nonetheless, questions remain about execution speed and the ability to adapt quickly to consumer shifts. Management acknowledged that product life cycles in lounge and social categories have dragged on too long, making the brand predictable. To fix this, lululemon is fast-tracking design processes, expanding vendor collaboration and even leaning on AI to accelerate innovation. While international momentum remains strong, the U.S. reset will determine whether fresh styles can translate into renewed sales growth, or if innovation alone is not enough to reverse the slowdown.

LULU’s Competition: Is Innovation Giving RL & NKE the Edge?

As lululemon grapples with slowing sales and product fatigue, rivals Ralph Lauren Corporation RL and NIKE Inc. NKE are leaning on fresh innovation to capture consumer attention.

Ralph Lauren’s second-quarter fiscal 2026 reflects its push to blend timeless style with fresh innovation. The company expanded digital-first initiatives, introduced product collaborations and leveraged design refreshes across core categories to strengthen consumer engagement. While international sales showed resilience, North America remained pressured, raising questions on whether innovation alone can offset macro headwinds. RL’s strategy is clear, but the payoff on sustained growth may still be unfolding.

NIKE is pushing hard on innovation to revive growth, leaning on performance-led franchises like the Vomero 18, new women’s basketball lines and sport-specific storytelling. Early momentum is visible, with A’ja Wilson’s A-ONE sold out in minutes, while running innovations drove triple-digit franchise growth. However, revenues remain pressured amid resets in classic footwear and promotional headwinds. Innovation is clearly sparking demand, but it may take longer to offset structural challenges.

The Zacks Rundown for LULU

lululemon’s shares have plummeted 58.2% year to date compared with the industry’s decline of 29.8%.

From a valuation standpoint, LULU trades at a forward price-to-earnings ratio of 12.01X, higher than the industry’s 11.19X.

The Zacks Consensus Estimate for lululemon’s fiscal 2025 earnings implies a year-over-year decline of 10.3%, whereas the consensus mark for fiscal 2026 EPS suggests growth of 2.1%. Earnings estimates for fiscal 2025 and 2026 have been southbound in the past seven days.

LULU currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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