Lululemon Faces Challenges in Domestic Market Despite Global Success

For Lululemon, the third quarter of 2024 marked an interesting contrast in its performance across different regions. While the company saw impressive global growth, especially in international markets, its U.S. performance has raised concerns.

By the Numbers

The company’s net revenue rose 9%, reaching $2.4 billion, with a 33% increase in international sales, while U.S. sales remained relatively flat. Despite the strong overall performance, the Americas region — which accounts for the bulk of Lululemon’s business — saw a modest 2% increase in net revenue and a 2% decline in comparable sales.

Lululemon’s struggles in the U.S. market can be attributed to several factors, including market saturation, according to Zachary Robichaud, instructor, School of Retail Management, Ted Rogers School of Management, Toronto Metropolitan University.

“Lululemon’s U.S. presence is well-established and the athleisure category overall is highly competitive, with players like Nike, Adidas, and emerging direct-to-consumer brands offering similar products at competitive prices,” Robichaud explained to PYMNTS.

Shifts in consumer behavior due to the economy is another factor, Robichaud noted, adding, “while athleisure remains popular, U.S. consumers may be prioritizing budget-conscious purchases amid economic pressures like inflation, seeking lower-cost alternatives. Specifically in the athleisure category, many low-cost competitors have entered the market.”

Still, brand perception challenges persist, he added.

“In a mature market like the U.S., staying fresh and innovative is critical,” Robichaud said. “Lululemon’s premium price point may limit its appeal in a cost-sensitive environment, especially if the brand isn’t perceived as consistently delivering newness or exclusivity.”

Another factor impacting Lululemon’s performance in the U.S. is the economic landscape, according to Greg Zakowicz, senior eCommerce expert at Omnisend.

“The biggest challenge in the U.S. is price point,” Zakowicz told PYMNTS. “As we’ve been discussing for the past 18 months, consumers are trading down for value. Athleisurewear is an area where that tradedown happens.

“Consumers still love the Lululemon brand, and its products have a reputation of lasting over time, which plays into the value equation. However, as a brand that doesn’t offer blanket deep discounts, they sell at a premium price. Until consumers feel confident in their personal economic positions, the price point will prevent quick growth.”

Looking Ahead

Despite these challenges, Lululemon officials remain optimistic about its U.S. prospects. CEO Calvin McDonald noted in the company’s Dec. 5 earnings call that Lululemon is working on strategies to revitalize its U.S. business.

“Last quarter, I laid out our plans to drive improvement in our U.S. business,” McDonald explained. “These plans include implementing a new reporting structure within our product team, increasing the penetration of seasonal newness within our assortments by Quarter 1 2025, and chasing into updated colors, prints and patterns to provide guests with more options in the second half of this year. Our merchandising and brand teams are now more fully integrated, which leads to better coordination and faster decision-making regarding how we bring our innovation to life.”

When looking at the composition of the company’s assortments, McDonald said “we are on track with our efforts to increase the penetration of seasonal newness and expect to be in line with historical levels in quarter one 2025. I feel good about the quality and quantity of newness the teams have planned, and we are well-positioned for spring.

“Our teams have been agile and have been chasing into seasonal colors, prints and patterns. These efforts have contributed to the sequential improvement in newness within our assortment in the back half of the year. We continue to see significant potential for growth in the U.S. Our guest retention remains high, and we see an opportunity to drive higher revenue per guest with more newness in the assortment. We continue to grow our membership program, and we are now 24 million members strong.”

Even given these efforts, some retail experts remain cautious about Lululemon’s prospects in the U.S. market.

In an interview with PYMNTS, Neil Saunders, managing director, retail, at research firm GlobalData, said, “Lululemon’s slower American growth raises the question as to whether it is starting to bump up against a ceiling.

“There is much more competition in the U.S. market, and even relatively loyal Lululemon consumers are shopping around more widely. This problem isn’t going to disappear over time. If anything, it’s going to intensify. Lululemon’s response to this needs to be to lean more heavily into more embryonic categories, including its men’s business.”

As Saunders noted, while Lululemon’s brand loyalty remains strong, the increased competition and economic pressures are contributing to a shift in how consumers are allocating their spending. As shoppers become more selective, Lululemon’s challenge will be to continue offering compelling products that resonate with their core audience while also attracting new customers in a crowded market.

“The other factor at play is a more constrained and pickier shopper,” Saunders added. “While most Lululemon shoppers are far from being hard-pressed, they are still impacted by inflation and have modestly reduced the volume of things they buy. This has a dampening impact on sales growth. The good news here is that this will automatically course correct as the consumer economy improves. So, the medium-term hope is that sales growth in the Americas will settle above current rates.”