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For years, Lululemon has been the gold standard of premium sportsear. They've cultivated a loyal following of mostly women who are willing to pay premium prices for their clothes for reasons of both quality and prestige. For the better part of the past decade, Lululemon was consistently one of the hottest stocks on Wall Street with its valuation reaching a peak of $65 billion.
But over the past year, the company has stagnated. In 2025, they reported a comparable sales decline in North America for the first time ever. Over the past year and a half, the stock price has lost twothirds of its value, wiping out more than $40 billion of market cap. Lululemon's founder is furious, accusing the company's new management of bastardizing the brand. In this video, we'll look at how Lululemon grew to be the largest premium sportsear brand in the world, and why the company is now struggling.
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And now back to the video.
Lululemon was founded in 1998 by a Canadian businessman named Chip Wilson. In the 1980s, he started a clothing company called West Beach, which made snowboarding clothes. In the early 1990s, he thought of expanding West Beach's offerings to also sell skateboards. He contemplated making a skateboard brand called Homeless Skateboards. He eventually talked to some lawyers who told him the Homeless brand name was too generic to trademark, so they never ended up making the skateboard. Before he scrapped the idea, Wilson talked to some distributors in Japan. The Japanese distributors were very interested in importing homeless skateboards. The letter L is difficult for Japanese speakers to pronounce. Counterintuitively, they thought this was actually a good thing because it would make the brand appear to be foreign and exotic. As it turns out, West Beach never ended up making the homeless brand of skateboards, and Wilson sold the company in 1997. But the unusual interest the Japanese distributors express in the homeless brand name stuck with him.
Shortly after selling West Beach, Wilson founded a new clothing company called Lululemon. Its first store opened in Canada in 2000. The name Lululemon doesn't have any particular meaning, but Wilson made sure to choose a name with three L's. With three L's, this word would be extremely difficult for Japanese speakers to pronounce. The brand would thus appear to be very exotic and be a major hit in Japan. At least that's what Wilson hoped. Lululemon didn't open its first store in Japan until the mid-2010s. Their expansion into Japan has been a commercial disappointment. In 2024, 75% of Lululemon's revenue came from North America. 15% came from China. 11% came from all other geographies. The other category mostly includes Europe. Japan probably represents less than 1% of the company's revenue. The company's name was chosen as a marketing gimmick that would only be relevant in Japan, a country that they didn't launch in until 15 years later. When they finally did launch in Japan, they generated minuscule sales.
So, what inspired Wilson to start a premium sportsear brand? In the 1990s, he attended some yoga classes which were populated mostly by women. He noticed that most yoga pants at the time were made of cotton or cotton spandex blends. They absorbed sweat and were baggy. Most yoga leggings were pretty cheap and designed for function over aesthetics. Most women would wear their yoga pants only during yoga or other workout activities. Lululemon developed a yoga pants made out of the fabric called Luon, which is a blend of nylon and spandex. Luon offered four-way stretch, moisture wicking in a soft but durable feel that stayed opaque even in deep poses. The design featured wide waistbands, flat seams, and gussets for mobility, making them both comfortable and flattering to wear. Unlike traditional workout wear, they were sleek enough to transition from the yoga studio to everyday life, effectively pioneering athleisure. Even if you aren't going to the yoga studio, you might still want to wear them because you think they look good. The Lululemon leggings simultaneously serve two purposes: performance and style.
From the beginning, Lululemon positioned itself as a premium brand. When they first started selling them in the early 2000s, they retailed for approximately $80 a pair. Established name brands such as Nike and Adidas sold leggings for 20 to $40. At first, Lululemon faced the same challenge as every new brand. No one had heard of them. Instead of spending heavily on traditional advertising, they came up with a cheaper and more effective strategy. They began giving free leggings to yoga instructors across Canada and the US. In class, students couldn't help but notice what their instructors were wearing. Because yoga teachers are typically in excellent shape, many students aspire to look like them. The subtle message was clear. If you want to take yoga seriously and get the same results, you should do what your instructor does, including wearing Lululemon. Suddenly, buying an $80 pair of leggings felt less like a splurge and more like an investment in self-improvement. Another cheap but effective marketing tool they used was their reusable tote bags. Most clothing stores give you cheap disposable bags to reduce costs. Lululemon instead gave bags that were sturdy enough to be reused. They had Lululemon logos on them as well as generic motivational expressions. Customers carrying these tote bags effectively became unpaid billboards advertising the brand.
Expensive clothing brands have often served as status symbols. You might pay $1,000 for a Gucci jacket, not necessarily because the quality justifies this price. Its main purpose is to signal to other people that you're successful enough to afford such clothes. Lululemon quickly became a status symbol. The high price point puts them in the same tier as luxury fashion. Yet, what they really broadcast is that the wearer is disciplined enough to carve out time for yoga or boutique fitness classes. Owning Lululemon doesn't just mean you can afford premium clothing. It suggests you are part of a cultural elite that prioritizes wellness as much as style, making the logo a badge of both affluence and an active aspirational lifestyle.
Over the years, Lululemon expanded far beyond just leggings. They now make various shirts, pants, and other clothing pieces. All of their clothing is made of various blends of fabric that wick sweat away from the body, stretch without losing shape, and dry quickly. In the early days, Lululemon only made women's clothing. They started selling men's clothing in 2013, but the brand remained stronger with women. In 2024, women's clothing represented 63% of the company's net sales. Men's clothing represented 24% and 13% was from unisex items such as bags and accessories.
Lululemon IPOed on the NASDAQ in 2007 under the ticker symbol LULU. Lululemon founder Chip Wilson served as CEO until 2005. In 2005, he stepped down as CEO, but retained his position as chairman of the board and held the position of chief innovation and branding officer. By the time the company went public in 2007, he was still heavily involved in the company.
Lululemon faced its first major controversy in 2013. They released a new model of yoga pants that were very thin. They were so thin that in some cases you could see through them. This caused significant consumer backlash and the company was forced to do a recall. Chip Wilson gave an interview to Bloomberg television where he attempted to address the issue.
>> There have always been pilling. The thing is is that women will wear seat belts that don't work or they'll wear a purse that doesn't work or quite frankly some women's bodies just actually don't work for it.
>> Chip Wilson didn't stop there. In an interview on Bloomberg TV, he got specific highlighting the offending area.
>> It's, you know, really about the rubbing through the thighs. How much pressure is there?
Wilson's statements were not received well by the public. Instead of taking responsibility for the product flaw, he said overweight women should not wear Lululemon yoga pants. In reality, the pants were so thin that even women of average size had problems with them. The product was clearly faulty.
Shortly after the Bloomberg interview, Wilson released the following video message addressed to Lululemon employees.
>> Hello, I'm Chip Wilson. I'm founder of Lululemon Athletica. I'd like to talk to you today about the last few days of media that's occurred around the Bloomberg interview. I'm sad. I'm really sad. I'm sad for the repercussions of my actions. I'm sad for the people of Llemon who I care so much about that have really had to face the brunt of of my actions. I take responsibility for all that has occurred and the impact it has had on you. I'm sorry to have put you all through this. For all of you that have made Lululemon what it is today, I ask you to stay in a conversation that is above the fray, I ask you to prove that the culture that you have built cannot be chipped away. Thank you.
This apology video was poorly received. He seemed to be apologizing for not so much his own statements, but for the negative media attention, which he did not believe to be justified. He told Lululemon employees to quote stay in the conversation that is above the fray unquote and quote prove that the culture you have built cannot be chipped away unquote. Wilson wanted to ignore the negative media attention and not change anything about how the company functions.
So what is the Lululemon culture that Wilson was trying to defend here? Lululemon positioned itself as a brand for the elite upper echelons of society. People who are wealthy enough to afford premium clothing and disciplined enough to maintain a high level of physical fitness. The thinking was encapsulated by a blog post Wilson previously wrote on the company's website. Mediocrity is doing an okay job, having a relationship that works, being just a little overweight, or having a job that pays the bills. Most people live in a state of mediocrity. Mediocrity is as close to the bottom as it is the top. Lululemon isn't catering towards people who are even a little overweight or have a mediocre job," unquote. They only want to serve customers who are at the top of society.
Following the see-through pants controversy, people started taking a closer look at Wilson's previous statements and blog posts. Here's another controversial blog post he wrote on the company's official website. Quote, "Breast cancer also came into prominence in the 1990s. I suggest this was due to the number of cigarette smoking power women who were on the pill. Initial concentrations of hormones in the pill were very high and taking on the stress previously left to men in the working world." unquote. It is true that smoking and certain contraceptives have been linked to a greater risk of breast cancer, but Wilson linking this to women entering the workforce was very ill judged, especially given the fact that Lululemon's core customer demographic is high earning women.
To be fair to Wilson, he was the founder of the company and was responsible for building a very successful brand. It was his idea to send free yoga pants to yoga instructors, thereby creating the image that Lululemon is worn by physically fit women. This indeed established Lululemon as a premium brand for the elite. This was pivotal in the company's early growth. But such a brand image is exclusionary by its nature. This ultimately limits the pool of potential customers. Currently, 72% of American adults are either overweight or obese. This number has increased every single year since at least 1990. If you only target people who are already physically fit, you'll be confined to a small and shrinking customer base. The board of directors increasingly saw Wilson as a liability for the brand's reputation. He was pressured to step down as chairman in December of 2013. He now has no formal role at the company.
Following Wilson's ouster, the brand pivoted to being more inclusive. They started making larger size clothes and marketing towards plus-siz customers. Throughout the late 2010s and early 2020s, Lululemon expanded rapidly. In 2014, the company had 280 stores, almost all of which were in the US and Canada. By 2024, this had grown to 767. They focused heavily on international expansion. China is their largest market outside of North America. As of the end of 2024, they had 171 stores in China. The aspirational and premium nature of the Lululemon brand is attractive to a large section of China's upper middle class. The expansion of the company's store count resulted in an equally impressive growth in revenue and profitability. Between 2013 and 2024, revenue grew almost sevenfold from 1.6 6 billion to $6.3 billion. Even in 2020, revenue increased. While their physical stores were shut down, they made up the difference with e-commerce orders from their website. Operating profits surged from $376 million in 2013 to $2.5 billion in 2024.
In late 2023, the company's stock price peaked at $510 per share, a 35-fold increase since the 2007 IPO. This gave the company a market capitalization of $65 billion. It looked like Lululemon was the next big thing, perhaps destined to rival the likes of Nike and Adidas in size. However, since the peak, Lululemon stock prices fallen by 2/3, wiping out more than $40 billion of market cap.
So, what went wrong? In the second quarter of 2025, Lululemon posted disappointing financial results. Net revenue was $2.5 billion, a 7% decrease compared to the year ago period. On the surface, a 7% sales increase sounds like a good result, but almost all this growth came from opening new stores. Comparable store sales only increased 1%. Comparable store sales is a change in revenue at stores which have been open for more than one year. This is a very important metric in the retail industry. Their international stores did very well with comparable sales increasing 15%. But North America, which represents the majority of revenue, saw comparable sales decline by 4%. For the full year of 2025, they expect revenue to increase approximately 3% versus 2024. In the first half of 2025, they've already opened 17 new stores, increasing their store count by 2.2%. Excluding the effect of new store openings, comparable store sales are likely to be flat, if not slightly negative, for the year. The main thing investors are worried about is a decline in comparable sales in North America. This indicates that Lululemon may have reached saturation in its home market.
So, why has Lululemon stagnated after two decades of non-stop growth? In recent years, two new premium sportsear brands have been eating away at Lululemon's market share. One is called Aloe, which currently has 120 stores in North America compared to Lululemon's 462. The second brand is called Viori, which currently has 92 stores in North America. Both Aloe and Viori are much smaller than Lululemon, but are expanding rapidly. Aloe and Viori sell very similar clothes as Lululemon. Their prices and quality are roughly comparable. So, how were these two upstart brands able to take market share from Lululemon, which has much more brand recognition. Lululemon pioneered the premium athleisure category in the early 2000s. But they're not doing anything that can't be easily replicated by others. Their only real competitive moat was their brand. Ship Wilson understood this. He insisted on marketing Lululemon as an exclusive brand only suitable for the upper rungs of society. Over the past few years, Lululemon has expanded rapidly and become more inclusive in its marketing. It's no longer as special as it used to be. It's now just a regular brand that has to deal with competition.
Chip Wilson is furious about what he views as a dilution of the brand's value. In a recent interview with Forbes, he said, quote, "For Lululemon to have a big opportunity, they would have to take risks, and I think they would have to become a brand that people want. I think through this whole diversity and inclusion thing that they're trying to become like the Gap, everything to everybody." And I think the definition of a brand is that you're not everything to everybody. I don't want people who are drinking Coke and Pepsi because I could see the obesity epidemic happening in the US even in 1995. I didn't want people who are wearing the Lululemon brand who are drinking Coke and Pepsi or eating McDonald's. The models on Lululemon's e-commerce site look very unhealthy to me. The men look sickly. The women, I don't know, but they're not inspirational in any case. So, what I'm really getting at here is that Lululemon has the opportunity to become a brand. But in order to become a brand, you've got to be clear that you don't want certain customers coming in."
All right, guys. That wraps it up for this video. What do you think about Lululemon? Should they follow Chip Wilson's advice and stop being inclusive, or would that just make things worse? Let us know in the comments section below. As always, thank you so much for watching, and we'll see you in the next one. Wall Street Millennial signing