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Listen to this article in summarized format Shares of the sportswear maker fell about 20% on Friday after Lululemon cut its full-year forecast for the second time, raising concerns that Heidi O’Neill will face a prolonged turnaround when she takes charge on September 8. The stock was trading around $100, near levels last seen in 2018, and is down sharply this year. Reuters reported that the decline could erase about $2.5 billion from Lululemon’s market value. The pressure is particularly acute in the company’s signature leggings business. Sales of leggings fell about 20% in the second quarter, as shoppers increasingly moved towards looser-fitting silhouettes. Lululemon’s share of the athleisure market also fell 10 percentage points to 43.9% in August, according to M Science data cited by Reuters. Meanwhile, rivals are gaining ground. Alo’s share rose 5.9 percentage points and Vuori’s increased 2.2 percentage points, highlighting how quickly the competitive landscape has changed around Lululemon. “Lulu is a powerful brand but an overstretched one,” Guggenheim analyst Simeon Siegel said. The challenge for O’Neill is therefore not simply to reignite sales, but to persuade customers that Lululemon can once again produce styles they want to wear. The company acknowledged that consumer preferences are changing. “We remain committed to the category (leggings), but there are shifts occurring with guests looking for away from body silhouettes,” interim CEO Meghan Frank said on Thursday’s post-earnings call. Product missteps have compounded the problem. In January, Lululemon briefly pulled its $108 Get Low leggings from its website after customers complained that they were see-through. “The rot has now set quite deeply in Lululemon and the market is very competitive, so this is not going to be an overnight turnaround,” GlobalData managing director Neil Saunders said. The financial strain is also becoming harder to ignore. At least 12 brokerages lowered their price targets following the latest results, with analysts questioning a cost structure that remains geared towards expansion even as sales weaken. Store square footage increased 11% in the second quarter. “I think the store expansion will slow down,” Morningstar analyst David Swartz said, according to Reuters, adding that cost cuts, management changes and a possible operational “realignment” can be expected. O’Neill’s background at Nike could give Lululemon an advantage. She is credited with growing Nike’s women's apparel business and has extensive experience in product development, an area where Lululemon has struggled. But analysts expect any recovery to take time. “We could see multi-quarter and even multi-year declines as the consumer moves away from leggings,” BNP Paribas Equity Research senior analyst Laurent Vasilescu said. Lululemon has some financial flexibility to fund the overhaul, with $1.4 billion in cash and equivalents at the end of the second quarter. Its shares also trade at about 11.50 times forward earnings, below Nike’s 20.76 and Adidas’ 13.41. For O’Neill, that leaves a difficult first task: rebuilding relevance with shoppers before trying to rebuild growth. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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