Once upon a time, almost every girl in America dreamed of owning a pair of Lululemon leggings.
Most of us remember how envious we felt when we saw our friends strutting down the streets in a pair of Lululemon Align leggings, and how embarrassing it was to be the only one in our group of friends without a pair.
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Some of us save for weeks while working a summer job to afford a pair of the coveted leggings, and others beg their parents to give them a pair as a birthday gift.
Related: Lululemon sees its 'it-girl' title slip through the cracks
Lululemon's immense success in the US might have boosted the company's ego too much, as it continued to use the same strategy that had worked for many years, leaving novelty and innovation on the back burner.
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Lululemon Gets an Ego Boost and Announces Development of New Business Strategy
In April 2022, Lululemon (lulu) announced the development of a five-year growth plan called The Power of Three x2. The strategy aimed to double its revenue from 2021 to $12.5 billion by 2026 through product innovation, improving guest experience and market expansion.
However, this new strategy may have been implemented too little, too late in the US: the constant red flags in this sector finally caught up with the company.
Related: Lululemon fights to keep 'it-girl' title away from competition
Although the United States was once one of Lululemon's strongest regions, thanks to its sustained growth, increased competition, its target audience's desire for novelty, and an uncertain economy resulted in slower growth percentages.
In the first quarter of fiscal 2024, Lululemon's U.S. comparable sales were flat for the first time in recent quarters after several warnings about slowing quarterly growth appeared to have gone unheeded.
Lululemon claims to have successful holiday sales, but continues to report declines in its US sector
On December 5, Lululemon released its third-quarter earnings results for fiscal 2024. Despite slow growth in its core market, Lululemon beat nearly all analyst expectations, maintaining its streak for the entire year so far .
During the holiday shopping season, Lululemon's US business saw the largest increase in traffic to its e-commerce site and shopping app. This boost allowed the company to benefit from the sale of last season's products, since it does not usually hold sales events in all stores.
With continued investment and successful execution of its Power of Three x2 strategy, Lululemon expects to return to its US market by 2026. The new plan will allow for the development of new full-price products that better resonate with customers.
Although Lululemon continues to claim it is seeing progress in its US sector with an increase in its e-commerce channel, its latest earnings reported flat revenue, slower store traffic and comparable sales in the Americas were negative overall compared to the last year.
Lululemon raises outlook for upcoming quarterly reports
Lululemon provided its guidance for its upcoming fourth-quarter 2024 earnings, reflecting an upbeat quarter following better-than-expected results, primarily attributed to its international markets.
“Our third quarter performance shows Lululemon's enduring strength globally, as we saw continued momentum in our international markets,” said Lululemon CEO Calvin McDonald. “Looking ahead, we are pleased with the start of our holiday season and remain focused on accelerating our business and increasing our brand awareness around the world,” he added.
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The company now expects revenue to rise 11% to 12% to $3.58 billion compared to last year, a slight increase from its previously stated outlook of $3.47 billion to $3.51 billion.
Earnings per share are now expected to range from $5.81 to $5.85, up from its previous guidance range of $5.56 to $5.64.
Although Lululemon beat analysts' expectations and claimed to have improved in the U.S., its shares have fallen more than 3% as of Wednesday's market close and are down 21.5% a year from now.
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