Few Canadian retailers have achieved the global success of Vancouver-based Lululemon. Since its founding in 1998, the company has grown from a single yoga-inspired apparel store into one of the world’s most recognizable athletic and lifestyle brands, helping to define the athleisure category and building a global retail footprint of more than 800 stores.
Now the retailer is confronting a more difficult environment.
Lululemon reported first-quarter revenue of US$2.5 billion, up 4 per cent from a year earlier, but the results revealed growing pressure in North America, where sales declined in both Canada and the United States. The company also lowered its outlook for the year and acknowledged that weaker customer traffic, product challenges and negative commentary surrounding the brand have affected performance.
The results come at a pivotal moment as the company prepares for a leadership transition, responds to increasing competition and works to restore momentum in the market where the brand was born.
Canadian Sales Decline as North America Weakens
While Lululemon continues to generate strong international growth, particularly in China, its North American business remains under pressure.
Revenue in Canada declined 3 per cent on a constant currency basis during the quarter, while U.S. revenue fell 4 per cent. Comparable sales across North America decreased 6 per cent.
Management lowered its full-year guidance and now expects revenue of between US$11 billion and US$11.15 billion, representing flat to slightly negative growth compared to the previous year.
The revised outlook marks a notable shift for a company that spent years delivering consistent growth and regularly exceeding expectations. During the earnings call, executives devoted significant attention to initiatives aimed at rebuilding traffic and improving sales trends in North America.
“We faced a few headwinds and a moderating sales trend,” said Meghan Frank, Interim Co-Chief Executive Officer and Chief Financial Officer.
For many Canadian shopping centre owners and landlords, the performance is noteworthy. Lululemon remains one of the country’s most productive apparel retailers and occupies prominent locations in many of Canada’s highest-profile shopping destinations.
Management Acknowledges Traffic and Product Challenges
One of the most notable aspects of the earnings call was management’s unusually candid assessment of the business.
Executives attributed the slowdown largely to weaker traffic and product launches that failed to generate the anticipated consumer response.
Frank said the company experienced a decline in traffic late in the first quarter and into the second quarter. Management believes negative commentary in both traditional and social media affected customer perceptions of the brand and contributed to softer performance.
The company also acknowledged that several recent product launches did not perform as expected.
Retailers rarely discuss unsuccessful product introductions in such direct terms.
“As we closed Q1 and entered Q2, we faced a few headwinds and a moderating sales trend,” Frank said. “We experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top-line performance.”
Recent months have brought several challenges for the retailer. Earlier this year, Lululemon temporarily paused online sales of products from its Get Low collection following customer complaints regarding product transparency during movement.
The company has also been dealing with public scrutiny stemming from a governance dispute involving founder Chip Wilson.
Wilson, who founded Lululemon and remains one of Canada’s best-known retail entrepreneurs, launched a proxy challenge earlier this year and publicly criticized aspects of the company’s direction. The dispute was resolved in late May after Lululemon agreed to add two new directors supported by Wilson.
Competition Continues to Intensify
The North American slowdown is occurring against a backdrop of increased competition in the premium activewear market.
For years, Lululemon largely defined the category. Today, consumers have more choices than ever.
Los Angeles-based Alo Yoga has expanded aggressively across Canada since entering the market in 2022. The retailer now operates stores in major Canadian markets including Toronto, Vancouver, Calgary, Ottawa and the Montreal region. Most recently, Alo opened at Oakridge Park in Vancouver, one of Canada’s most closely watched retail developments and a project located in Lululemon’s home city.
Industry sources also indicate that California-based Vuori has been actively pursuing Canadian retail opportunities as part of its broader expansion strategy.
Neither Alo nor Vuori were identified by management as contributors to recent weakness. However, the premium activewear category has become considerably more competitive than it was during much of Lululemon’s rise. The category the company helped create now includes several well-capitalized brands targeting similar consumers with premium products and growing physical store networks.
International Markets Continue to Drive Growth
While North America remains challenged, international markets continue to perform strongly. Revenue in Mainland China increased 30 per cent during the quarter, while comparable sales rose 13 per cent. Lululemon continues to project approximately 20 per cent annual growth in China for the full year.
The company now operates 816 stores globally and plans to continue expanding internationally, with a significant portion of future store openings expected to be located in China and other international markets.
The contrast between North America and international markets highlights how the company’s growth profile is evolving. Markets that were once viewed as emerging opportunities are increasingly becoming primary drivers of expansion.
A New Chapter Begins in September
The coming months will bring another significant transition. In September, Heidi O’Neill will assume the role of Chief Executive Officer following a lengthy career at Nike, where she held senior leadership positions spanning product, consumer and marketplace operations.
She will be based in Vancouver and take over leadership of the company at a time when investors and industry observers are closely watching Lululemon’s ability to regain momentum in North America.
Her appointment comes shortly after the resolution of the proxy battle involving Wilson and amid growing questions about how the company will balance international growth with efforts to strengthen performance in its core market.
Rebuilding Momentum
Management emphasized that it is already taking action. The company plans to increase marketing investment, accelerate product development timelines, expand community-focused activations and improve its ability to respond more quickly to consumer demand through supply chain enhancements.
Executives also highlighted investments in technology and artificial intelligence initiatives aimed at improving operational efficiency.
“We are not sitting still,” Frank said during the earnings call. “We are moving with urgency to make the necessary adjustments to reaccelerate momentum, particularly in North America.”
In August, Lululemon will bring back its SeaWheeze Half Marathon and Festival in Vancouver, one of several community-focused initiatives the company is using to deepen engagement with consumers and strengthen brand affinity.
Whether those efforts are enough remains to be seen.
What is clear is that Lululemon is entering a new phase in its evolution. The company that helped pioneer modern athleisure is navigating increased competition, changing consumer expectations and a leadership transition, while working to restore momentum in the North American market that fueled its rise from a Vancouver startup to a global retail powerhouse.
