Canadian apparel brand Lululemon reported quarterly earnings that showed sales dropped in North America as many Canadians grapple with the high cost of living.
This comes as the so-called “k-shaped” economic trend continues, which sees lower-income consumers pulling back on non-essential spending and prioritizing value, while higher-income households increase their wealth and are able to spend more on these purchases.
The Bank of Canada noted in November that consumers overall are more “cautious” amid an uncertain job market and trade war with the United States.
Regardless of consumer incomes, when choosing to buy items like yoga pants and other athleisure staples, Lululemon has been struggling in some regions of the world as the competition continues to challenge the company’s share of the market.
“When Lululemon came to the market, it basically invented the category, right? No one had ever even heard of athleisure before Lululemon,” says Doug Stephens, a retail analyst and founder and CEO at Retail Prophet.
“I think the company really does need to sit down and retool for a new era where they face a very saturated market in their category. They face a different kind of consumer and certainly different economic conditions — so that’s going to take a big rethink.”
At one point, Lululemon was mostly alone in a clothing market that is now saturated with dozens of other brands. These include Alo Yoga, Fabletics and Athleta, while companies like Nike, Adidas and Under Armour have expanded their product lines to compete in the space.
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“The perfect pose that the brand used to execute with ease has given way to a much scrappier posture that has been present for quite some time,” said Neil Saunders, managing director of GlobalData Retail, in a written note following the earnings release.
Saunders added that Lululemon faces three problems: The market for athleisure is weaker than it was, while the competition is “more intense and of a higher caliber.”
He also said that against this backdrop, Lululemon’s execution has faltered.
Lululemon is one of several companies that offer products like yoga pants and other athletic gear, but at comparably higher prices than some more budget-friendly options that may be available.
In June, Lululemon filed a lawsuit against Costco alleging the company was selling knock-off products, or “dupes” of some of its patented apparel lines under its own Kirkland branding, including some hoodies, jackets and pants — and at a fraction of the price compared to Lululemon.
Lululemon says in the third quarter of 2025, it saw its comparable sales in the Americas (United States, Canada, Mexico and South America) fall five per cent compared to the same period in 2024. Meanwhile, sales everywhere else climbed a total of nine per cent, and China spiked 24 per cent.
Overall, Lululemon saw its sales improve worldwide, but the company may be losing its grip over the North American market — including in Canada, where the company was founded and is currently headquartered.
The company also announced its CEO, Calvin McDonald, plans to step down from his role at the end of January 2026, but will stay in an advisory role.
In a statement published in the earnings release, McDonald did not expand on what led to the decision.
“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.
“Together, we have transformed the athletic apparel industry and the opportunity ahead for Lululemon is substantial. 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.”
Stephens says once a new CEO is picked and steps into the role, they will have a difficult task of bringing a completely different perspective that will shape where the brand can go in the future.
He also says it may not be a good strategy to stray from the “premium” association Lululemon has in order to offer more affordable options for some consumers.
“The premium positioning is where Lululemon wants to be, and I would say ‘hang on to it, be worth the extra money.’ Because what we know about every generation, whether we’re talking about baby boomers, millennials, or Gen Z, is that they will make room in their budgets for things that they feel are really worth it,” says Stephens.
“Whether it’s products from Apple or travel experiences, we know that there’s money where they want it to be for the things that they (consumers) want. It may mean sacrificing on other things, but if something is premium enough, they will stand in line for it, and they will pay for it.”
— With a file from The Associated Press
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