New Categories, Old Challenges: Can lululemon Stay Ahead of the Curve?

lululemon athletica inc. LULU, once an unstoppable growth engine, is facing an inflection point. After years of rapid expansion and tripling revenues within six years, the company is encountering both internal and external headwinds that are testing its adaptability. In the second quarter of fiscal 2025, lululemon’s earnings per share exceeded expectations, but revenues fell short, prompting a downward revision of full-year guidance. While international markets, particularly China, continue to deliver double-digit gains, the U.S. business, which accounts for the bulk of revenues, has lost momentum amid sluggish demand and shifting consumer preferences. 

To reignite growth, lululemon is leaning on fresh product innovation after acknowledging that its lounge and social lines have grown “too predictable.” Under global creative director Jonathan Cheung, the brand plans to raise new styles to 35% of its assortment by spring 2026, with launches like Loungeful and Big Cozy blending performance and fashion. lululemon is also enhancing its “Science of Feel” platform and using AI-driven design to speed up product development and better respond to consumer trends.

Staying ahead in a crowded activewear market won’t be easy for lululemon. Rising competition, macroeconomic pressures and higher tariffs have strained margins, challenging the brand’s ability to balance pricing with its premium image. Still, its loyal customer base, strong global momentum and renewed focus on innovation suggest resilience. The coming year will test whether its refreshed product strategy can reignite excitement and reaffirm its leadership in premium performance apparel.

LULU’s Rivals: NIKE & Under Armour’s Brand Strength

In the competitive athletic apparel and footwear market, NIKE Inc. NKE and Under Armour UAA are both powerful players striving to capture the attention of performance-driven consumers while adapting to shifting market dynamics.

NIKE continues to reign as the powerhouse of the global athletic apparel industry, leveraging its unmatched brand equity, expansive distribution network and relentless focus on innovation. The company’s scale and marketing prowess enable it to command strong consumer loyalty while driving growth across both performance and lifestyle categories. Its focus on digital transformation and direct-to-consumer expansion has strengthened margins and deepened customer engagement, particularly through its NIKE App ecosystem and membership platform.

Under Armour, meanwhile, remains in a rebuilding phase as it works to regain market relevance and strengthen brand perception after years of inconsistent growth. The company continues to emphasize its performance heritage, aiming to reconnect with core athletes and reestablish authenticity in training and sports categories. Recent leadership changes and renewed discipline around inventory and pricing have helped stabilize operations, though challenges persist in driving consistent consumer demand and differentiating itself from larger rivals like NIKE and lululemon.

The Zacks Rundown for LULU

lululemon’s shares have plunged 52.6% year to date compared with the industry’s decline of 20.1%.

From a valuation standpoint, LULU trades at a forward price-to-earnings ratio of 13.95X, higher than the industry’s 16.81X.

The Zacks Consensus Estimate for lululemon’s fiscal 2025 earnings implies a year-over-year decline of 11.9%, whereas the consensus mark for fiscal 2026 implies growth of 1.12%. Earnings estimates for fiscal 2025 and 2026 have moved downward in the past 30 days.

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

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

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