Lululemon shares fell 20% after full-year forecast cut and new CEO appointment
Investors rejected a second forecast reduction following the announcement of Heidi O'Neill as CEO. Sales in the Americas dropped 8% while leggings volumes declined 20% in the second quarter.
Lululemon Athletica shares dropped approximately 20% on Friday amid investor concerns over a delayed strategic overhaul under new CEO Heidi O'Neill, who assumed leadership on September 8. The athletic apparel firm reduced its full-year sales guidance for the second time, intensifying fears that its financial recovery will take an extended period. Major brokerages lowered price targets, with analysts noting that current cost structures may remain misaligned with shrinking revenues despite store square footage rising 11% in the second quarter.
Revenue in Lululemon's Americas market declined 8% year-over-year, whereas China sales fell 2% following a previous growth of 24%. Sales of leggings, a core product line, decreased roughly 20% as consumer preference shifted toward looser-fitting designs. Consequently, Lululemon's athleisure market share dropped to 43.9%, marking a 10 percentage point loss. Competitors including Alo and Vuori expanded their market shares by 5.9 and 2.2 percentage points respectively.
Analysts argue the company operates a cost structure designed for expansion rather than contraction. O'Neill faces the task of winning back customers from rivals with updated merchandise while managing potential operational realignment. Market value may lose roughly $2.5 billion due to the sharp stock decline.
