Lululemon struggles to reverse concerning customer behavior

Lululemon, famous for its luxury athletic wear, is struggling to emerge from a rough patch with consumers, who have switched gears in recent months.As many consumers face financial strain amid inflation and higher costs of living, Lululemon, which sells apparel at prices exceeding $100, has been struggling to boost its sales.During the third quarter of this year, foot traffic in Lululemon stores increased by 4.2% year over year, according to recent data from Placer.ai. However, Lululemon revealed in its latest earnings report that its comparable sales in the Americas decreased by 5% year over year during the quarter. As sales dropped, Lululemon's net revenue in the Americas decreased by 2%. The decline in sales occurs during a period when the company is facing increased competition from athletic apparel brands such as Alo Yoga and Vuori, which have been expanding their retail presence. Nike, another top Lululemon rival, also recently revealed a new partnership with Skims, a shapewear brand founded by billionaire socialite Kim Kardashian, resulting in seven new activewear collections that launched in September.Lululemon’s poor sales performance also comes after it shared in September that it is rolling out “modest price increases” on a small portion of its product assortment due to tariffs, a change that will continue to roll out over the next few months. Lululemon's sales have recently sagged.Shutterstock Lululemon sees shift in customer behaviorDuring an earnings call on Dec. 12, Lululemon CEO Calvin McDonald said the apparel market is facing headwinds as consumer behavior shifts. “In terms of the flow-through and what we've seen in the overall marketplace, we continue to see sort of pressure in the apparel space,” said McDonald. “We held share in premium athletic and lost some slight share in the performance apparel as we see guest behavior and trading down.”He said that while consumer behavior remains “uncertain,” many continue to hunt for value.“We're seeing a little bit in terms of how they're responding to the promotional activity in the marketplace today, and they're definitely looking for ways in which they can save in value,” said McDonald. “And it's behavior we've seen throughout the year and continued into Q3 (the third quarter of this year).”Related: Lululemon faces unexpected new rival as customers pull backLululemon Chief Financial Officer Meghan Frank said during the call that while August was the company’s best month with consumer demand, its weakest month was October. It also saw demand dip after “a strong Thanksgiving period.”“We have seen some pullback in demand post-Thanksgiving in terms of traffic,” said Frank.The decline in consumer demand comes at a time when consumers nationwide have been more cautious about their spending as tariffs raise concerns about the state of the U.S. economy, according to a recent survey from Numerator. How U.S. consumers are battling tariffs in 2025:Approximately 87% of consumers are concerned about the impact of tariffs on their finances or shopping habits, while 63% are worried that tariffs will raise prices of everyday goods.Specifically, about 30% of consumers are concerned about tariff-related price increases impacting the apparel market.Also, 82% of consumers plan to change their shopping habits in response to tariffs, which includes cutting back on nonessential spending, searching for sales or coupons, delaying nonessential or big-ticket purchases and switching to lower-priced retailers or discount stores. In addition, 77% are concerned about the possibility of arecessionin 2026. Source: Numerator “Changes in consumer sentiment are a leading indicator for changes in purchasing behaviors, and if consumers remain this pessimistic about the future of the U.S. economy, we can expect cutbacks in consumption going forward and a potential recession later this year,” said Numerator Chief Economist Leo Feler in a statement in April. Lululemon hopes a major product change will boost salesFrank said that “sales haven't met our expectations” this year, and that Lululemon will be focused on bringing “product newness and innovation” to several clothing categories in its stores to win back customers.“From a product innovation perspective, our process always begins with research, really focusing on solving for the unmet needs,” said Frank. “And I believe the pipeline has a lot of those solutions, both across our activity as we continue to put our performance activity categories initiatives first across run, train, yoga, golf and tennis. You'll see a lot of innovation across all five of those activities.”She also said that the company will increase its new style penetration to 35% while it scales back its overall product assortment. “We plan to reduce the density of our assortment on a local basis to better highlight styles that are most relevant,” said Frank. “This will enable improved visual merchandising for the styles we know are most important to the guests in each local market.”While Lululemon focuses on “newness,” more consumers have been opting to purchase secondhand clothing as they face economic challenges. According to a recent survey from ThredUp and GlobalData, the U.S. secondhand apparel market grew by 14% in 2024, which is its strongest annual growth since 2021. The market is expected to reach $74 billion by 2029.Why U.S. consumers are buying secondhand apparel:Approximately 59% of consumers said that if tariffs make prices for apparel increase, they will shop for more affordable options such as secondhand clothes. Also, 34% of consumers said that they plan to spend their apparel budget on secondhand in the next 12 months. Additionally, 46% of consumers say if they can find an item secondhand, they won’t buy it new. About 48% said that personalization, improved search and discovery make shopping secondhand apparel as easy as shopping new. “Resale continues to outpace the broader retail sector, with online resale in particular driving the sector’s growth,” said ThredUp GlobalData Managing Director Neil Saunders in a statement. “Shoppers are prioritizing quality as resale value becomes an increasingly important factor in purchasing decisions, and retailers are evolving their secondhand offerings to meet consumer demand with new avenues like social commerce, further driving adoption and preference for secondhand,” he said. Lululemon makes unexpected leadership changeAs Lululemon shifts its strategy amid struggles with sales, the company has also recently announced plans to replace its CEO. McDonald will officially step down as CEO of Lululemon and member of the company’s board of directors on Jan. 31, after seven years of serving in both positions, according to a recent press release.He will serve as a senior advisor to the company through March 31, 2026. While the board searches for the company’s next CEO, Frank and Lululemon Chief Commercial Officer André Maestrini will serve as interim co-CEOs after McDonald officially steps down.“Serving as CEO of Lululemon has been the highlight of my career, and I am incredibly proud of everything our team has accomplished over the last seven years,” said McDonald in the press release. More Retail:Marshalls makes bold change to return policy ahead of holidaysWalmart quietly shrinks generous offer for holiday shoppersBJ’s Wholesale announces free offer for customers amid struggles“Together, we have transformed the athletic apparel industry and the opportunity ahead for Lululemon is substantial,” he said. “I believe the outstanding product pipeline we’ve built, and action plan we’ve put into place, will yield positive results, and deliver value to shareholders in the months and years ahead.”In a statement, Lululemon founder Chip Wilson claimed that the leadership change is a “tremendous failure” by the company’s board. "As one of the largest active shareholders of Lululemon, I am deeply concerned about what appears to be a tremendous failure by the Board to competently plan for the future and manage an effective succession process,” said Wilson. “This latest failure in my opinion only amplifies the urgency the company faces and the obvious need for the CEO search to be led by new, independent directors with real experience,” he continued. Wilson also said that after “years of poor decisions” that eroded the Lululemon brand, the company “needs revitalization and an infusion of new skills to get back to being a product-first company that creates real, long-term shareholder value.”Related: Ulta Beauty customers will encounter a harsh change in stores