Retailer Lululemon ramping up discounts significantly as sales momentum dwindles sharply
In the world of athletic apparel, Lululemon, a brand known for its yoga-inspired gear, is facing increased competition from rivals Vuori and Athleta. A recent lawsuit filed in federal court against Costco for trademark infringement is just one of the challenges Lululemon is currently navigating [1].
Despite a 4% year-over-year growth in North America revenue, outperforming Nike and Athleta, Lululemon's focus on newness and markdowns has had a mixed impact on its earnings and market share [1]. Analysts at Jefferies have raised concerns about the growing markdown activity in Lululemon's core categories, which they observed during recent store visits [2].
The competitive landscape has become more intense, with Vuori and Athleta stores, often located near Lululemon's, outperforming the latter in visual marketing cohesion and overall aesthetic. This has contributed to rival retailers beating Lululemon in digital and store traffic since February 2025 [2]. The overlap with Vuori and Athleta is seen as nibbling away at Lululemon's growth, especially amid increasing consumer price sensitivity and a noticeable drop in U.S. store traffic in Lululemon's latest quarter [2].
In response to these pressures, Lululemon is expanding its brick-and-mortar store footprint in the U.S., indicating confidence in its brand and long-term growth potential [2]. However, the brand seems to be moving away from its yoga-based products, emphasizing "newness" with more bold colors and logo-centered designs. This strategy, according to Jefferies analysts, poses a risk to earnings [2].
To counteract this, Lululemon is raising prices starting in Q2 due to shifting tariff rates. The new No Line Align legging, a core component for Lululemon's recovery, is expected to play a significant role. Despite the limited rollout of the No Line Align legging, Jefferies analysts have expressed skepticism about its potential impact [2].
Lululemon's Q1 revenue and comps growth in June stemmed mostly from international regions. However, the brand has been struggling with sell through, according to Jefferies analysts. In an effort to address this issue, Lululemon announced layoffs of about 150 corporate employees at store support centers in June [1].
CEO Calvin McDonald stated that U.S. shoppers are acting more price conscious. This has led to increased markdown activity at "alarming rates," according to Jefferies [1]. Inconsistent pricing on identical products was also noted by Jefferies analysts during their visits to Lululemon stores [1].
Looking ahead, Lululemon aims to open 40 to 45 stores in 2025. CFO Meghan Frank stated that U.S. store traffic fell in the quarter. Despite these challenges, Lululemon continues to maintain a robust operating margin of 23%, suggesting profitability remains healthy even amid tariff-related cost pressures [1].
[1] Yahoo Finance. (2025, June 1). Lululemon Athletica Inc. Q1 2025 Earnings Call Transcript. Retrieved September 15, 2025, from https://www.nasdaq.com/articles/lululemon-athletica-inc.-q1-2025-earnings-call-transcript-2025-06-01
[2] CNBC. (2025, June 2). Lululemon's new leggings and store openings won't be enough to boost sales, Jefferies says. Retrieved September 15, 2025, from https://www.cnbc.com/2025/06/02/lululemon-lulus-new-leggings-and-store-openings-wont-be-enough-to-boost-sales-jefferies-says.html
- The competitive landscape in the athletic apparel industry has become more intense, with rivals such as Vuori and Athleta introducing stores that often perform better than Lululemon in terms of visual marketing cohesion and overall aesthetic.
- Analysts at Jefferies have raised concerns about the growing markdown activity in Lululemon's core categories, observing this trend during their recent store visits and deeming it a potential risk to the brand's earnings.
- In an attempt to counteract this, Lululemon plans to raise prices starting in Q2 due to shifting tariff rates and consistently market new products, aiming to attract customers with bold colors and logo-centered designs.
- Despite the challenges faced by Lululemon, the company intends to open 40 to 45 stores in 2025, maintaining a robust operating margin that indicates profitability remains healthy even amid tariff-related cost pressures.
