Is ‘Newness’ Enough To Reignite Lululemon’s Growth?

Lululemon plans to increase new styles as a percentage of its mix, from 23% currently to 35% by next spring, in order to spark a return to growth for its U.S. business amid heightening competition.

The ramp-up around newness comes as Lululemon reported second-quarter earnings which topped guidance, however, sales missed plan. Guidance was slashed for the year due the continued deteriorating U.S. business, as well as the margin impact from higher tariff rates. The removal of the de minimis exemption, which allowed shipments valued under $800 to enter the country duty-free, was also cited as a factor in the reduced guidance.

On an analyst call, Calvin McDonald, Lululemon’s CEO, noted that the retailer’s performance offerings, which account for about 60% of Lululemon’s mix, continue to grow in the U.S. with gains across key activities: yoga, run and train, golf, and tennis.

However, the remaining lifestyle mix continues to underperform. McDonald noted that Lululemon had already invested in the second half of last year in bringing “newness” penetration back to historical levels — largely through a combination of new styles and seasonal color updates within core styles — but the reaction to color updates was lesser than expected.

Lululemon CEO Breaks Down Issues Hampering Consumer Interest, But Signals Change Is Coming

Undertaking a deeper analysis, McDonald said Lululemon’s product life cycles within its lounge and social offerings had “run too long” and had become “stale” to its top consumers. He suspected the reason some older performance franchises are still seeing healthy demand is because the fabrics and innovations are “solving the unmet needs of our guests” as users work out, but also that relying on “core seasonal color interpretations” isn’t bringing enough freshness to casual assortments.

He added, “We have become too predictable within our casual offerings and missed opportunities to create new trends.”

Lululemon is also focusing on its capabilities to go faster within the go-to-market process, aiming to chase strong performing styles.

McDonald said Lululemon’s “brand health continues to be strong” in both retention and customer acquisition. He further said the recent success of the Scuba Waffle shows consumers will respond “when it is truly something [they have] not seen before.”

McDonald, however, also noted that the overall market for premium athletic wear in the U.S. remains challenging, with declines continuing in the second quarter. He said, “Consumers are spending less on apparel overall, spending less in performance active wear and are being more selective in their purchases, seeking out truly new styles.”

He said that Lululemon is gaining market share within performance apparel even as the sector has declined, according to the latest Circana market share data.

With investors concerned about the growth of Alo Yoga and Vuori, McDonald further pointed out that the “competitive landscape is different today than it was even 2 or 3 years ago.” The recent softness in lounge and social core franchises, he added, serves as a reminder of the “need for us to continue to create new styles so that we can stay ahead of those that are copying our successes.”

Lululemon’s challenges come as Nike is similarly recommitting to innovation after relying too much on its three classic franchises: Air Force 1, Air Jordan 1, and Dunk.