Lululemon on Tuesday gave a weak outlook for 2026, as tariffs, higher expenses and a dramatic proxy fight with its founder weigh on profits.
The athleisure company’s guidance for the current quarter and fiscal year came in below expectations for both revenue and bottom line.
Lululemon expects first-quarter sales to be between $2.4 billion and $2.43 billion, lower than the company’s forecast of $2.47 billion, LSEG said. The company expects earnings per share to be in the range of $1.63 to $1.68, which is also lower than the company’s estimate of $2.07.
Lululemon expects full-year sales to be between $11.35 billion and $11.5 billion, lower than the forecast of $11.52 billion. The outlook for per-share earnings of $12.10 to $12.30 was also much lower than the $12.58 expected.
“We are very much a work in progress in terms of our action plan, and we are very committed to the importance of getting back on track on a number of fronts,” Interim Co-CEO Megan Frank said in an interview with CNBC. “We have a new creative director. His first line was a hit in Q1, and we’re seeing some green shoots from Q1 products. So we’re excited about the momentum of that line item. We’ve had great response from some of our recent product activations, and we’ve also accelerated our time-to-market since then.”
During Lululemon’s holiday quarter, the company beat expectations for both revenue and bottom line, but Wall Street had been lowering expectations for the same period in recent months.
Here’s how the Vancouver-based retailer’s fiscal fourth-quarter results compare to Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: $5.01 vs. $4.78 expected Revenue: $3.64 billion vs. $3.58 billion expected
The company’s net income for the three months ended February 1 was $586.9 million, or $5.01 per share, compared with $748.4 million, or $6.14 per share, in the year-ago period.
Sales increased slightly from $3.61 billion in the same period last year to $3.64 billion, an increase of about 1%.
Lululemon raised its fourth-quarter financial outlook during the ICR conference in Orlando earlier this year, focusing attention on the company’s 2026 outlook after more than a year of poor results.
The retailer was always considered a luxury brand and offered few promotions, but relied on discounts to drive sales and move inventory. The company is now working to reverse that strategy this year, Frank said. Lululemon expects the measure to hurt sales in the short term, but over time the company will return to a regular-price business, she said.
On the other hand, there is a lot of pressure on the bottom line. Increased tariffs and the end of mini-miss exemptions continue to be a significant cost to the company.
Lululemon expects the tariffs will cost the company $380 million in total this year, up from $275 million last year. After accounting for mitigation efforts, the net impact is expected to be $220 million in 2026, up from $213 million in 2025.
Lululemon has negotiated with suppliers and taken other steps to reduce the impact of the tariffs, but in recent months in particular it has focused on promotions to boost sales and has not raised prices to offset the additional costs. The brand was already geared toward the higher end of the market even before President Donald Trump’s tariff increases last year, and has limited means to offset tariffs, especially as it faces intense competition and a slowing athleisure market.
The company raised prices on some products last year. Frank said shoppers are still responding positively so far, but there are currently no plans to expand on this increase.
In addition to the tariffs, the company also expects to increase expenses such as marketing, payroll, incentives and costs related to its proxy fight with founder Chip Wilson. Mr. Wilson, Lululemon’s largest independent shareholder, has been pressuring the company to change its board of directors and has accused the company of losing sight of its creative vision.
Just before the earnings release, Lululemon announced the addition of the former Levi Strauss CEO Chip Berg attended the board meeting. Mr. Berg was not among the candidates Mr. Wilson considered, but he has extensive experience in publicly traded companies, having served as CEO of Levi’s for about 13 years. During his tenure, Levi began pursuing a more profitable direct sales strategy, increasing sales by approximately 30%.
As part of the announcement, Lululemon said board member David Mussaffar, managing partner and chairman of private equity firm Advent, will not stand for re-election at the company’s 2026 shareholder meeting when his current three-year term ends. The announcement marks a victory for Wilson, who has publicly criticized Mussaffar. In a letter to shareholders last month, Wilson said Mussaffar oversaw the interview process for board candidates during the campaign, creating a potential conflict of interest.
Mr. Wilson asked Mr. Mussaffar to resign from the board, citing issues including a lack of independent leadership, sources said.
Mussaffar did not respond to requests for comment.
Ahead of the earnings release, Wilson issued a statement saying shareholders will “critically evaluate” claims of success or improvement when Lululemon releases results.
“The core problem at Lululemon is one that the company has been grappling with for many years. There is a disconnect between the company’s creative engine and the board’s understanding of how brand strength and product excellence drive cultural strength, margin sustainability and long-term shareholder value,” he said.
Lululemon declined to comment.
Some parts of Lululemon’s business are still growing, primarily in China and other international regions, which account for a portion of its overall revenue. Same-store sales in the Americas, its largest region, have not grown in the past two years, and Lululemon expects them to decline again in 2026.
The company said it expects sales in the Americas to decline 1-3% in 2026.
Meanwhile, sales in China are expected to increase by approximately 20% and in other regions by mid-teens.
