TLDR
- LULU shares fell 3.24% to $180.35 as see-through $108 leggings expose testing failures
- CEO Calvin McDonald departing while company battles product quality and reputation crisis
- Analyst slams company’s advice to customers: wear different underwear to fix defective pants
- Mirror fitness device and Disney partnership join list of $500 million-plus failed ventures
- Stock plunged 56% in past year with analysts maintaining cautious Hold consensus rating
The athleisure brand that defined a category is now defending its reputation. Lululemon closed at $180.35 yesterday, sliding 3.24% as its latest product disaster drew harsh criticism from retail experts.
Lululemon Athletica Inc., LULU
The “Get Low” leggings became transparent when customers moved. The $108 tights forced a company-wide meeting where executives explained the malfunction instead of celebrating new launches.
Lululemon’s solution? Tell customers to change their underwear. Neil Saunders, a retail analyst, dismissed the approach as “honestly, that’s a joke.” He argued that premium brands shouldn’t require workarounds for broken products.
The leggings failure reveals deeper problems. Social worker Amore Prince tested them in-store but found they didn’t function properly. Store employees suggested different sizes. Nothing worked. Prince said the product “just doesn’t work.”
Development Speed Sacrifices Testing
CEO Calvin McDonald accelerated the design timeline to get products to market faster. The strategy created what insiders call “self-inflicted wounds.”
Chief Brand and Product Activation Officer Nikki Neuburger addressed hundreds of employees globally last week. The conversation focused entirely on why premium yoga pants were failing basic functionality tests.
McDonald is stepping down. The company operates under interim leadership while interviewing candidates. Elliott Investment Management wants retail veteran Jane Nielsen for the role.
Founder Chip Wilson has escalated his criticism. He nominated three directors to the board and argues the company abandoned its core fitness community.
Expansion Mistakes Pile Up
Lululemon’s growth experiments have consistently missed the mark. The company spent $500 million acquiring Mirror, a home fitness device. It shut down three years later.
A personal care products line failed to gain customer interest. Recent partnerships have confused loyal shoppers.
The Disney collaboration got destroyed on social media. Users called it “random” and “basic AF.” Simeon Siegel from Guggenheim Securities noted that original customers feel “disenfranchised” by these moves.
Retail analysts say Lululemon transformed from category leader to trend follower. The brand that invented athleisure now copies fast-fashion playbooks.
Market Response and Analyst Views
LULU shares have dropped 56% over twelve months. The stock continues hitting new lows as quality concerns mount.
Twenty analysts rate LULU a Hold. Just one recommends buying. The average twelve-month price target of $211.71 implies 17.4% upside from current levels.
The company’s fundamentals remain solid. Revenue grew 8.8% in the last trailing twelve months. Operating cash flow margin stands at 16.8%. The business generates cash despite reputation damage.
Historical patterns show LULU recovered from previous sharp drops. Stocks that fell 30% or more in under 30 days delivered median twelve-month returns of 26%. Peak returns reached 31%.
But past recoveries happened when brand strength was intact. Current quality issues and leadership uncertainty create different conditions.
Long-time customers built Lululemon into a powerhouse through word-of-mouth loyalty. Those same customers now question whether the brand deserves premium pricing.
The incoming CEO faces a challenge: rebuild quality standards while maintaining growth targets. The company needs to reconnect with fitness enthusiasts who made it successful.
Wall Street wants proof that Lululemon can fix its product development process and restore brand credibility before recommending shares to investors.
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