Lululemon Investors May Have to Wait Until 2027 For a Turnaround. Here's Why.

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What happened to Lululemon?

In 2022, Lululemon launched its 2nd "Power of Three" program to treble its men's revenues, treble its integer revenues, quadruple its planetary revenues, and astir treble its full gross (from $6.3 cardinal to $12.5 billion) from fiscal 2021 (which ended successful Feb. 2022) to fiscal 2026. It acceptable those goals aft achieving its archetypal "Power of Three" goals -- which acceptable the aforesaid maturation targets from fiscal 2018 to fiscal 2023 -- up of schedule.

But implicit the past 4 years, Lululemon's comparable-store income maturation has decelerated, and its gross margins person declined. In North America, its largest market, income of women's apparel stalled arsenic macro headwinds throttled user spending, the pandemic-era athleisure roar ended, and it faced fierce contention from smaller brands similar Alo Yoga and Vuori.

Data source: Lululemon. YOY = Year-over-year.

That unit forced Lululemon to usage markdowns to boost sales, compressing its margins and diluting its premium appeal. Inflation and tariffs exacerbated that pressure. It fared amended overseas, but that maturation couldn't offset its persistent problems successful North America.

To marque matters worse, Lululemon mislaid 2 of its cardinal leaders implicit the past year: its CEO Calvin McDonald and main merchandise serviceman Sun Choe, some of whom joined the institution successful 2018. It precocious hired Heidi O'Neill, a erstwhile Nike (NYSE: NKE) executive, arsenic its adjacent CEO -- but Nike has besides been struggling with galore of the aforesaid challenges arsenic Lululemon.

What volition hap to Lululemon implicit the adjacent fewer years?

For fiscal 2026, Lululemon expects gross to turn lone 2%-4% to $11.35 cardinal to $11.50 billion, which would miss its "Power of Three x2" people of $12.5 billion. Analysts expect its gross to emergence 3% to $11.5 cardinal arsenic its EPS declines 7% to $12.31.