Ask AI · What’s Behind Lululemon’s Stock Plunge of More Than 70%?

Lululemon’s capital-driven “myth” is fading. As of the close on March 27, the company’s stock closed at $145.85 per share. Compared with its historical high of $516.39 per share, the decline is as much as 71.76%, and its market value is left at just $16.114 billion.

As “Hermès of yoga pants,” Lululemon once had too many labels that competitors envied: high growth, high loyalty, and high premium. In July 2022, its market cap surpassed Adidas and jumped into becoming “the industry’s No. 2.” At the end of December 2023, the market’s frenzy reached its peak: the stock hit a top of $516.39, with total market value at about $56.8 billion, or roughly RMB 392.59 billion.

▲ Lululemon’s stock performance over the past 8 years

Now, the glamour fades, and a cruel reality comes into view: capital no longer wants to underwrite Lululemon’s imagined upside.

01. Revenue growth slows, and pricing power weakens

Recently, sportswear brands have successively released their 2025 financial reports, and the contrast between good and bad news is stark.

For Li-Ning and Anta, which target professional segments, their performance isn’t exactly dazzling, but it has also remained consistent with past years—steady growth through small steps. For On and Salomon, which are bundled with the concept of the “middle-class lifestyle,” revenue hits new highs and the premium remains firm; they manage both “face” and “substance.” By contrast, the former middle-class sports benchmark, Lululemon, has not been doing so well.

Over the past year, Lululemon was still growing, but its growth rate lagged far behind its peers; its past moments in the spotlight are gone.

In fiscal year 2025, Lululemon’s total revenue was $11.1 billion (about RMB 76 billion), up 4.86% year over year, basically in line with expectations after the guidance was lowered. By comparison, Anta and Amer Sports (the parent of Arc’teryx) saw revenue increases of 30.01% and 27%, respectively—both far higher than Lululemon.

The China market has been the biggest contributor. In the reporting period, Lululemon sold $512 million more overall than the prior year, and the China market contributed $394 million of that. But because the Americas region—where revenue accounts for more than 70%—isn’t performing well, both revenue and same-store sales data are declining. In the end, Lululemon achieved only slight growth, setting the record for the lowest revenue growth rate since it listed in 2007; previously, its annual revenue growth had consistently been above two digits.

There’s no doubt that weak growth momentum is one of the reasons Lululemon was abandoned by capital. But that’s not all. Even more concerning for capital markets is that Lululemon’s pricing power is still loosening—this is the foundation for building a premium through branding. Its anxiety can be seen clearly in its sharply different attitude toward “counterfeits.”

▲ Source: “Caijing Tianxia”

In June 2025, Lululemon filed a lawsuit against Kirkland’s in-house brand at Costco, claiming that the latter sells counterfeit products that have caused tremendous damage to the brand.

By comparison, Lululemon held a more open attitude toward counterfeits and “alternatives” a few years earlier. In 2023, Lululemon held an “alternative exchange” event where consumers could use any brand and any price “Align counterfeit” yoga pants (Align is a series under Lululemon) to get a brand-new authentic pair for free. At that time, when asked about its view on counterfeits, the company’s executive response was, “Sometimes imitation is a form of recognition.”

Lululemon’s stance toward counterfeits changed by 180 degrees. What’s reflected behind this is anxiety about pricing power and premium capability. In the footwear and apparel space, exclusive fabrics are only a shallow technical barrier: they can create a differentiated wearing experience and support early high premium pricing, but they can’t solve everything once and for all. In recent years, competing brands have diverted customers, and on top of that, Lululemon itself has been discounting and trading brand “tone” for short-term performance—ultimately leading to the steady weakening of the brand’s premium ability.

This fading premium is also reflected in the financial reports. In the fourth quarter of fiscal year 2025, Lululemon’s gross margin fell further to 54.9%. The company said that one part of the reason was “greater discounting力度.” At the same time, as of the end of the fourth quarter of fiscal year 2025, the company’s inventory increased 18% year over year to $1.7 billion. Measured by units, inventory quantity increased 6% year over year.

In the eyes of capital, inventories that keep rising—especially if their growth far exceeds the revenue growth rate of the same period—are no different from a ticking time bomb. That means Lululemon could get stuck in a vicious cycle: “the more it discounts, the lower the price it commands, and the harder it is to remain profitable.”

If slower revenue growth and weaker premium ability are Lululemon’s core pain points in its fundamentals, then internal governance turmoil and rising tariff costs dragging down profitability only make matters worse, continuously amplifying capital’s concerns about Lululemon. According to the company’s estimates, due to tariffs, related costs could reach $380 million; after adopting hedging measures, the tariff impact is $220 million.

At the end of 2025, Lululemon’s founder and original CEO who had led the company for 7 years stepped down. The selection of a new CEO remains undecided to this day, leaving uncertainty over the brand’s mid- to long-term strategy.

Looking back now—from a long run of soaring performance to the fading of the halo—Lululemon’s stock price trajectory has drawn an inverted arc that opens downward. From $145 to $516, Lululemon took 5 years and 3 months; from falling from the peak and returning to $145, it took just a little more than two years.

02. Stuck in a “neither up nor down” predicament

“ What Lululemon is facing now is a typical ‘edge-of-the-cake dilemma,’” brand management consultant Lao Yi told Caijing Tianxia.

The so-called “edge-of-the-cake dilemma,” put simply, means the brand is trapped structurally in the middle: it can’t break through the mindset and premium barrier of high-end brands from the top; it can’t compete with the cost and price advantages of value brands from the bottom. In the end, it’s stuck in the middle zone, with growth constrained and profits continuously squeezed.

This predicament isn’t impossible to avoid, but it requires extreme restraint. Clearly, Lululemon didn’t manage to escape it. Ultimately, it shed the halo of “middle-class faith” step by step, and its premium system gradually disappeared.

Roll the clock back to 2019. In April of that year, Lululemon proposed a strategy called “Power of Three,” claiming it would, within five years, achieve goals of “doubling men’s wear revenue, doubling digital business revenue, and quadrupling international business revenue.” At the time, the new CEO had only been in the role for a short while and needed to prove results and satisfy the capital market, and Lululemon’s own momentum was also strong then.

For sportswear brands, expanding demographics, channels, and markets are the three usual paths to increase revenue. Lululemon achieved the five-year targets in just three years. But once the tone of exchanging scale for growth rate is set, it also plants the hidden risk of diluting the brand’s scarcity.

▲ Source: “Caijing Tianxia”

Then, in April 2022, after completing its goals early, Lululemon quickly set a new task: by 2026, revenue would double to reach $12.5 billion. Of that, men’s wear and digital business revenue would double again, and international business would need to grow fourfold—what’s known as the “Power of Three ×2” plan. At the time, the company’s CEO also said it planned to expand into more scenarios, including tennis, golf, and hiking.

In the second year after the big promises were made, Lululemon’s stock hit a historical high. But in the pursuit of growth, some actions began to morph. For example, to support expansion in men’s wear and international business, Lululemon clearly accelerated its inventory replenishment pace, and inventory growth started to outpace revenue growth. This means Lululemon had to rely on more frequent discounting to absorb inventory. For a brand positioned in the mid-to-high end, frequent discounting is often the beginning of the brand’s scarcity being gradually dissolved.

Another example: when Lululemon’s main base in the Americas hit a growth bottleneck, the company treated China as a life raft. It began accelerating store openings in China, even at the cost of channel deepening. Industry publication Hualingzhi found that from 2022 to July 2023, on average, a new Lululemon store opened in China every 15 days. In the past two years, Lululemon has opened more stores in lower-tier cities, and it even earned a slightly sarcastic nickname: “yoga pants from the outer five counties.”

It looks like everything Lululemon did was aimed at growth, but invisibly it also erased the brand’s tone. No wonder the founder keeps coming out to complain every so often—at one point even spending money to buy newspaper front-page headlines to “go short” on the company—saying that Lululemon is losing its soul, and that pleasing everyone would cause the brand’s core power to be lost.

Today, Lululemon’s product aging problem has become increasingly prominent. Combined with competitors and “alternatives” constantly eating into market share, its survival space has been further squeezed, and ultimately it has slid into the “edge-of-the-cake dilemma.”

What’s somewhat dramatic is that Lululemon once pushed hard to grow in order to meet capital’s expectations. Now, after having overdrawn its high-end tone and the dividends have run out, it ends up being abandoned by capital.

Of course, Lululemon’s slide to this point can’t be blamed entirely on itself. “The direction of sportswear brands is often closely tied to the broader environment,” Nel, someone working in the footwear and apparel industry, said. In recent years, the demand of Lululemon’s core customer base has changed: they “don’t want to live too perfectly refined and tightly strung,” and instead pursue a more fashion-influenced sense of relaxed ease. That’s also, in a way, an inevitability behind Lululemon’s fall.

“Back then, gym workouts and strength training started to become popular. Under Armour, known for tight-fitting clothing, saw its market cap surpass Adidas and became the ‘industry’s No. 2.’ Later, as women’s fitness and yoga surged, Lululemon rode that wave and its market cap once even surpassed Adidas. Now, consumption trends have changed again. American brand Alo, with aesthetic designs that carry fashion and trend sensibilities, has started to eat into Lululemon’s market share,” Nel added.

With troubles inside and outside, Lululemon has once again tightened its grip on the China market as its life raft. Earlier this year, the brand signed swimmer Wang Shun as a brand ambassador, aiming to strengthen its sense of professionalism through his image. At a recent performance meeting, Lululemon said it plans to continue opening new stores in 2026, with 25 to 30 in international markets—“most of them in China.”

It’s just unclear how long Lululemon can stay popular in China.

(Author | Linmu, editor | Wu Yue; image source | Visual China. This content comes from Caijing Tianxia WEEKLY)