Lululemon on Tuesday gave a weak outlook for 2026 as tariffs, rising spending and a dramatic proxy battle with its founder weigh on its financial results.
The athletics company’s guidance for the current quarter and fiscal year came in below expectations in terms of earnings and results.
Lululemon expects its first-quarter sales to be between $2.40 billion and $2.43 billion, lower than estimates of $2.47 billion, according to LSEG. It expects earnings per share to be between $1.63 and $1.68, also lower than estimates of $2.07.
For the full year, Lululemon expects revenue between $11.35 billion and $11.50 billion, below expectations of $11.52 billion. Earnings guidance of $12.10 to $12.30 per share was also well below estimates of $12.58.
“The work is really underway in terms of our action plan, and we’re really focused on the importance of correcting course on a number of fronts,” said interim co-CEO Meghan Frank in an interview with CNBC. “We have a new creative director, his first line is coming in the first quarter, we’re seeing some green shoots, I would say, of the product in the first quarter, so we’re excited about the momentum we have on that item. We’ve had great responses from some of our recent product activations, and we’re also reducing our time to market.”
During Lululemon’s holiday quarter, the company beat estimates on both revenue and earnings, although Wall Street has lowered its expectations for the period in recent months.
Here’s how the Vancouver-based retailer performed in its fiscal fourth quarter compared to what Wall Street expected, according to a survey of analysts by LSEG:
- Earnings per share: $5.01 versus $4.78 expected
- Income: $3.64 billion versus $3.58 billion expected
The company’s net income for the three months ended Feb. 1 was $586.9 million, or $5.01 per share, compared with $748.4 million, or $6.14 per share, a year earlier.
Sales rose slightly to $3.64 billion, up about 1% from $3.61 billion a year earlier.
Lululemon raised its fourth-quarter fiscal guidance at the ICR conference in Orlando earlier this year, so all eyes were on the company’s 2026 guidance after more than a year of underperformance.
The retailer, still considered a high-end brand that rarely offered promotions, relied on discounts to drive sales and move inventory. The company is now working to retire that strategy this year, Frank said. Lululemon expects the move to weigh on sales in the short term, but it will return the company to full-price business over time, she said.
At the same time, it is experiencing a number of pressures on its financial results. The increase in tariffs and the end of the de minimis exemption continue to represent a major cost for the company.
This year, Lululemon expects the tariffs to cost the company $380 million, up from $275 million last year, on a gross basis. After mitigation efforts are taken into account, the net impact is expected to be $220 million in 2026, up from $213 million in 2025.
Lululemon has negotiated with its suppliers and taken other steps to reduce its exposure to tariffs, but it is not raising its prices to offset the additional costs, especially as it has turned to promotions to boost sales in recent months. The brand was already priced toward the high end before President Donald Trump’s tariff hikes last year, which left it with fewer tools in its arsenal to offset the duties, especially as it faces intense competition and a slowdown in the leisure market.
Last year, the company raised prices on a number of items. Buyers are still responding favorably so far, but there are no plans to take advantage of these increases at this time, Frank said.
Beyond pricing, the company is also seeing increased spending on marketing, labor, incentives and costs related to its proxy fight with founder Chip Wilson. Wilson, Lululemon’s largest independent shareholder, has pressured the company to make changes to its board and criticized it for losing sight of its creative vision.
Just before releasing its results, Lululemon announced the addition of former Levi Strauss CEO Chip Bergh to its board of directors. Bergh was not among Wilson’s proposed candidates, but he has considerable experience in public companies and spent about 13 years as CEO of Levi’s. During his tenure with the company, Levi began pursuing a more profitable direct sales strategy and sales increased by approximately 30%.
As part of the announcement, Lululemon said that David Mussafer, board member, managing partner and president of private equity firm Advent, will not seek re-election at the company’s next shareholder meeting in 2026, when his current three-year term ends. The announcement marks a victory for Wilson, who has publicly criticized Mussafer. In a letter to shareholders last month, Wilson pointed out that Mussafer oversaw the board’s interview process with potential candidates at a time when he was running for office, creating a potential conflict of interest.
A source familiar with the matter said Wilson asked Mussafer to step down from the board because he lacked independent leadership, among other issues.
Mussafer did not immediately respond to a request for comment.
Before the results were announced, Wilson issued a statement saying shareholders would “critically evaluate” any claims of success or improvement by Lululemon when the results are released.
“Lululemon’s core problem is one the company has struggled with for years: There is a disconnect between the company’s creative engine and the board’s understanding of how brand power and product excellence fuel cultural strength, margin sustainability and long-term shareholder value,” he said.
Lululemon declined to comment.
Although parts of Lululemon’s business continue to grow, it has primarily seen this expansion in China and other international regions, which represent only a fraction of overall revenue. Same-store sales in its largest region, the Americas, have not increased in about two years, and Lululemon expects another year of decline in 2026.
The company said it expects its sales in the Americas to decline between 1% and 3% in 2026.
At the same time, sales in China are expected to grow by around 20%, and in the rest of the world by around 15%.