Lululemon is entering 2026 at an inflection point. The company is navigating a slowdown in its North America business, leaning on international growth to offset it and continuing the search for a permanent CEO — all while trying to reestablish its footing as a premium, product-led brand.
The pressure is showing up in store traffic. Visits slightly declined year over year in the fourth quarter of 2025, with softness building over several months and peaking in December, according to data from store traffic platform Placer.ai. That trend aligns with the company’s reported performance: steady internationally, but underwhelming in its largest market, the U.S.
According to the company’s fourth-quarter earnings released on March 17, revenue rose 1% to $3.6 billion. North America remained flat, with comparable sales down 2%, including a 1% decline in the U.S. Meanwhile, “China mainland revenue increased 28%, with comparable sales increasing 26%,” while revenue in the rest of the world grew 12%, according to Megan Frank, Lululemon’s interim co-CEO and CFO.
Executives are clear on where the work needs to happen. “We are working side by side with the senior leaders across our organization to drive our strategies forward and to improve the U.S. business, while also maintaining our international momentum,” said Frank.
At the same time, leadership remains in flux. The company is still searching for a permanent chief executive, with Frank noting that the board is “running a robust search process” and meeting with candidates, and that “the process is moving forward.”
The near-term challenge is rooted in how Lululemon managed its business in 2025. Increased markdowns weighed on both margins and brand positioning, contributing to a 550-basis-point drop in gross margin in the fourth quarter. The company is now working to rebalance toward full-price selling.
“A top priority for the management team as we enter the [new fiscal] year is returning to full-price sales growth in North America,” Frank said.
Executives described the fourth quarter as a low point for the business. “We had the lowest water line in Q4, with markdowns over-penetrating,” Frank said. “We are improving that in Q1, but it will still be negative, flipping flat in Q2 and then accelerating in the second half of the year.”
The reset comes at a moment when competition is becoming more pointed, particularly in core categories like leggings. After repeated product issues, including transparency complaints over the last few months, Lululemon is facing increased scrutiny from consumers who are paying closer attention to quality and performance claims and to brands like On that are jumping into athleisure categories.
“There is an immediate small hit as some consumers abandon the brand. However, in the scheme of things, this is not large,” said Neil Saunders, managing director at GlobalData. “The more serious erosion comes after repeated failures and disappointments, but that takes time to build.”
That dynamic creates an opening, but not a guaranteed change. “There is an opportunity for competitors to take share, but how much each grabs is a function of their visibility in the market and how good a job they do of communicating the point of difference,” Saunders said.
The company is pushing “new style penetration to approximately 35%,” according to Frank, up from 23% last year, with a focus on entirely new products rather than updates to existing styles. Early response has been positive. “We are definitely seeing improvement to date and seeing some really great green shoots,” Frank said.
Still, the recovery will take time. Lululemon expects North America revenue to decline 1–3% in 2026, with total company growth projected at 2–4%. In the first quarter, North America is expected to decline in the mid-single digits.
International markets continue to provide a counterbalance. “Momentum remains strong,” said Andre Maestrini, interim co-CEO, president and chief commercial officer of Lululemon, pointing to growth in China and expansion across newer markets like South Korea and EMEA. The company plans to open the majority of its new stores outside of North America this year.
For now, Lululemon is managing through a transition period. The brand remains the top player in U.S. women’s activewear, but softer traffic, increased discounting and recent product missteps have created near-term pressure.
Leadership is betting that a sharper product focus and a return to full-price discipline will restore momentum over time. “We recognize that it will take some time to see the benefits of these actions,” Frank said, adding that the company is confident these steps will “drive our brand forward in the near, mid and long term.”
