lululemon Faces Softer Consumer Demand: But Brand Loyalty Holds Strong

lululemon athletica inc.’s LULU second-quarter fiscal 2025 results reflected a changing consumer backdrop and emerging product challenges in its largest market — the United States. While earnings topped the Zacks Consensus Estimate, revenues fell short and management trimmed the fiscal 2025 guidance. The core issue was not brand erosion, but rather tougher consumers who are spending less on apparel and prioritizing truly “new” offerings.

lululemon acknowledged that it leaned too heavily on longstanding lounge and social franchises, such as Scuba, Softstreme and Dance Studio. Seasonal color updates were not enough to excite higher-value customers who already own these products, creating a slowdown in frequency and total spend.

Despite these pressures, loyalty and engagement metrics remain remarkably strong. The brand continues to grow its guest base across all age groups, membership has expanded to nearly 30 million, and performance categories, like yoga, run, train, golf and tennis, are still delivering growth. lululemon is also gaining market share in performance apparel even as the broader U.S. activewear sector declines, signaling that its innovation and technical credibility are still winning with consumers. This underscores an important nuance: the problem is not demand for lululemon, it is demand for stale portions of the assortment.

Management is treating this period as a reset. A revamped creative team is increasing the share of new styles from 23% to roughly 35% by spring 2026, with early launches such as Daydrift, BeCalm, Big Cozy and Loungeful already in motion. Faster go-to-market processes, vendor collaboration and improved agility are designed to chase into winners more quickly. Combined with strong international momentum, particularly in China, lululemon remains positioned for renewed growth once fresh product cycles take hold.

How Are CROX & RL Performing Amid Softer Consumer Trends

Amid a softer consumer spending backdrop and heightened promotional activity across retail, Crocs Inc. CROX and Ralph Lauren Corporation RL are charting notably different paths as they work to protect margins, maintain brand heat and sustain growth.

Crocs is navigating a challenging consumer environment, with consolidated revenues falling 6.2% in third-quarter 2025 and the Crocs-brand segment slipping 2.5%. Strong direct-to-consumer (DTC) growth (up 2% on the Crocs brand) and an international uptick (up 5.8%) underscore enduring brand affinity. With its solid cash flow enabling a $203-million share repurchase and $63 million debt reduction, the company appears confident in its loyal base while adapting to softer demand.

Ralph Lauren is feeling the effects of a softer global consumer, with shoppers staying selective and promotions rising across apparel. However, brand loyalty remains a clear strength. In first-quarter fiscal 2026, core customers continued to trade into higher-value products, full-price sell-throughs stayed strong and brand heat remained intact across key regions. Momentum in direct-to-consumer and continued growth in Asia further highlight that even in a tougher backdrop, Ralph Lauren’s elevated positioning is resonating.

The Zacks Rundown for LULU

lululemon’s shares have plummeted 58% year to date compared with the industry’s decline of 20.4%.

From a valuation standpoint, LULU trades at a forward price-to-earnings ratio of 12.72X, lower than the industry’s 15.56X.

The Zacks Consensus Estimate for lululemon’s fiscal 2025 earnings implies a year-over-year decline of 11.8%, whereas the consensus mark for fiscal 2026 suggests growth of 1.1%. Earnings estimates for fiscal 2025 have been northbound in the past 30 days. Meanwhile, earnings estimates for fiscal 2026 have been unchanged.

LULU currently carries a Zacks Rank #3 (Hold).

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

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