Lululemon’s New CEO Steps Into a Brand Losing Its Grip on the Leggings Throne

Heidi O’Neill walked into Lululemon’s Vancouver headquarters on Sept. 8. She arrived as the company’s new chief executive. The timing could hardly look worse.

Four days earlier, Lululemon had slashed its full-year sales and profit forecasts for the second time in three months. Comparable sales fell 9% in the second quarter. Leggings, the product that built the brand, dropped 20%. Shares plunged nearly 18% in a single session and now trade near eight-year lows. The stock has lost more than half its value in the past year.

O’Neill Inherits a Company in Retreat

The numbers tell a stark story. Net revenue slipped 4% to $2.4 billion. In the Americas, the company’s biggest market, revenue fell 8% and comparable sales plunged 12%. International markets offered little relief. Comparable sales there declined 3%. Even China, once a bright spot, saw revenue drop 2% in constant currency after an 8% plunge in comparable sales.

Meghan Frank, interim co-CEO and chief financial officer, didn’t sugarcoat it on the earnings call. “We expected a better response,” she said, referring to new styles. “We know there is significant work ahead.” Frank now returns to her CFO role. André Maestrini, the other interim leader, steps back to his prior post.

Executives pointed to shifting consumer tastes. Shoppers have moved toward looser, “away from body” silhouettes. Lululemon’s efforts to follow that trend haven’t yet offset the collapse in its signature tight-fitting bottoms. “We remain committed to the category, but there are shifts occurring with guests looking for ‘away from body’ silhouettes,” Frank told analysts, according to Financial Post.

But the problem runs deeper than one bad quarter. This marks the latest chapter in a prolonged slowdown. Comparable sales in North America have been flat or negative for ten straight quarters. Traffic has softened. New product launches have landed unevenly. Marketing missteps, including a poorly received event in China that sparked social media backlash, added fuel to the fire.

Competitors have seized the opening. Data from M Science showed Lululemon’s share of the athleisure market shrinking 10 percentage points to 43.9% in August. Alo Yoga and Vuori picked up ground. Younger buyers have flocked to those names for yoga and activewear. Online “dupes” have copied Lululemon’s looks at lower prices. The brand that once defined premium athleisure now fights to hold its position.

Founder Chip Wilson, who owns about 8.6% of the company, made those tensions public. He waged a proxy battle against the board earlier this year, criticizing strategy and leadership. A truce brought two of his picks onto the board and a third by Oct. 1. Wilson agreed to an 18-month standstill on public criticism. The peace gives O’Neill some breathing room. Yet the underlying fractures remain.

O’Neill herself carries baggage from her previous stop. She spent nearly 30 years at Nike, rising to president of consumer, product and brand. There she helped expand the business from $9 billion to $45 billion in revenue. But Nike has faced its own struggles with slowing demand, excess inventory and questions over innovation. Some observers note the parallels. The Fortune article that forms the basis of this analysis argues O’Neill inherits a mess at Lululemon that looks strikingly similar to the one she left behind at Nike.

Analysts have grown blunt. “When Heidi O’Neill finally takes the helm as Lululemon CEO next week, she will be in the unenviable position of leading a company that is in a worse position than when she accepted the job,” Sky Canaves, principal analyst at Emarketer, told CNN Business. Emarketer’s Zak Stambor added that improving product offers only half the battle.

BNP Paribas analysts, led by Laurent Vasilescu, did a double take at the 20% leggings decline. They see potential for multi-quarter, even multi-year weakness as consumers move away from athleisure. Guggenheim’s Simeon Siegel called Lululemon “a powerful brand but an overstretched one.” Neil Saunders of GlobalData warned the rot has set in deeply in a competitive market. No quick fix awaits.

The company has already pulled back. It now plans 35 net new stores this year instead of 40. Pop-up openings drop to about 40 from 65. Expense discipline has sharpened. Marketing spending will rise to rebuild brand heat. Product development cycles must accelerate. SKU density in stores will tighten.

Gross margin actually expanded 200 basis points to 60.5%. But that improvement came largely from $134.5 million in tariff refunds, which added 560 basis points. Strip those out and the picture looks less reassuring. Net income fell more than 11% to $329 million. For the full year, Lululemon now sees revenue declining 5% to 7%, down from a prior view of flat to down 1%. Earnings per share guidance dropped to $9.48-$9.73 from $10.95-$11.15.

Third-quarter revenue is expected to fall 10%-11%. North American sales could drop in the mid-teens. The guidance cut reflects prudence. It also signals limited visibility.

O’Neill’s track record at Nike covered product creation, design, marketing and digital commerce. She knows scale. She understands how to build women’s apparel businesses. Yet Lululemon demands something different. The company built its identity on community, innovation in technical fabrics and a premium price point tied to performance. That formula worked brilliantly until it didn’t.

Recent executive turnover adds another layer. Chief strategy officer Rachel Acheson left in August after more than 14 years. The chief AI and technology officer, Ranju Das, departed after less than a year. Talent has flowed to rivals such as Arc’teryx. Rebuilding the leadership bench sits high on O’Neill’s list.

But. The brand still carries enormous equity. Its connection with ambassadors and core guests runs deep. International markets, outside China’s recent stumble, continue to show pockets of growth. Cash reserves provide runway. Share repurchases continued in the quarter.

So what must O’Neill do? Observers point to several fronts. She needs to restore product excitement without chasing every trend. Faster innovation cycles could help. Marketing must reconnect with both loyal customers and younger shoppers who have drifted. Pricing strategy requires care. Heavy discounting risks damaging the premium image that supports high margins.

Some analysts urge a pause in aggressive square footage growth when same-store sales remain negative. “When square footage grows double digits with negative comps, it always ends in tears,” Vasilescu said earlier this year, per Business in Vancouver.

Recent coverage reinforces the stakes. A Sept. 9 Retail Dive report highlighted the reduced store plans and the scale of the leggings drop. Bloomberg noted on Sept. 3 that O’Neill’s challenges have only grown with the latest outlook cut. X conversations in early September echoed investor frustration, with users questioning whether traffic, price or product should top her fix-it list.

Lululemon invented much of modern premium athleisure. Its success persuaded millions to trade traditional pants for stretchy, flattering leggings that moved from studio to street. That cultural shift powered years of explosive growth. Now the category it created has matured. Rivals have copied, improved and specialized. Consumer tastes have evolved toward comfort in different forms.

O’Neill doesn’t start from zero. The brand retains cachet. Its community remains a strength few competitors match. Yet the data show clear erosion. Leggings sales, long the profit engine, have turned sharply negative. North America, the heart of the business, refuses to stabilize. Guidance keeps moving in the wrong direction.

Her success will hinge on whether she can diagnose the product and brand issues that interim leaders only began to address. Execution speed matters. So does clarity of vision. Nike gave her decades of experience in global scale and product pipelines. Lululemon needs her to apply those lessons while adapting to a more intimate, community-driven model that once set it apart.

The coming quarters will test her. Investors, already skeptical after the latest sell-off, will watch for early signs of stabilization. Traffic trends. Sell-through on new assortments. Marketing effectiveness. Any hint of a leggings recovery. Without progress on those fronts, the stock’s slump could linger. With it, the pressure on the new CEO will only mount.

And the clock is ticking. Lululemon’s second-quarter results marked the last full period before her arrival. The third quarter, already guided sharply lower, becomes her first true test. The mess she inherited looks familiar from her Nike days. Fixing it will demand fresh thinking for a brand that lost its way.