The slowdown reflects both internal missteps and broader pressures. Lululemon has leaned heavily on its core franchises, allowing product cycles to stagnate. CEO Calvin McDonald has acknowledged that product fatigue has set in, with seasonal colour updates failing to excite shoppers especially in the casual and lounge categories. New styles account for just 23% of the assortment, below target levels pushing consumers toward competitors like Alo and Vuori, while low-cost knockoffs at major chains such as Costco further erode the brand’s edge. Macro headwinds are adding to the pressure, with tariffs weighing on profits and higher living costs squeezing Lululemon’s core customers. US store traffic dropped 8.5% last quarter, underscoring weaker confidence and a shift toward value-driven spending.

Competition in the premium activewear market has intensified as the segment matures. US activewear sales continue to grow at a steady pace, but softness at the high end has left Lululemon exposed to more fashion-forward challengers. International markets remain a relative bright spot, with China delivering strong double-digit growth, though management has already moderated its outlook there. To reignite momentum, Lululemon is shifting away from incremental colour refreshes toward genuinely new designs, with fresh product expected to reach stores in H1 2026. The company aims to lift the share of new styles from 23% to around 35% by Spring 2026 while also developing faster “chase” capabilities to better capture emerging consumer trends.

For now, Lululemon’s competitive edge looks diminished. With slowing US momentum, tariff headwinds, and rising competition, the brand faces an uphill battle to regain its once-dominant position in athleisure. At High Street, we look for companies with durable moats that have the ability to defend and extend their advantage over time. We currently hold no exposure to pure-play athleisure, as we see the category as commoditised and overly reliant on shifting consumer trends rather than resilient through cycles. In contrast, companies like Nike and Adidas, with proven moats and diversification across performance and lifestyle categories, present far stronger long-term investment cases. We continue to monitor these opportunities closely, assessing fundamentals to weigh risk and return before considering inclusion in our portfolios.

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