Lululemon Athletica Inc. is forecasting a soft outlook for 2026 as it navigates U.S. tariffs, lagging North American sales and a proxy battle with its founder.

The Vancouver-based activewear retailer expects full-year 2026 revenue to grow between two per cent to four per cent (in the range of US$11.35 billion to US$11.5 billion), just shy of analysts’ average estimate of US$11.52 billion.

“We recognize there is more work to be done, and we have been course-correcting on a number of fronts,” said Lululemon interim co–chief executive and chief financial officer Meghan Frank on a call with analysts on Tuesday. “But we are encouraged by the guests’ response to our recent new product drops and activations.”

In the company’s latest earnings report, net revenue increased one per cent year over year to US$3.6 billion in the fourth quarter of fiscal 2025, which ended Feb. 1. For the full year, net revenue increased five per cent to US$11.1 billion.

Net income for the quarter was nearly US$587 million, down from US$748 million a year ago. Diluted earnings per share were US$5.01 — above analysts’ expectations of US$4.78 per share but below the US$6.14 per share reported a year earlier.

In Lululemon’s key North American market, net revenue grew three per cent in Canada and fell one per cent in the United States.

The U.S. accounts for most of Lululemon’s sales, but the company’s growth in the country has slowed amid increased competition in the athleisure space,

weaker consumer spending and recent customer complaints about product quality. In 2026, Frank said Lululemon expects both North American and U.S. revenue to fall one to three per cent.

“We know we must improve our performance in North America while continuing our momentum internationally,” she said.

After higher discount activity in 2025, Frank said the company expects markdown levels to improve “modestly” for the full year and for year-over-year decreases to start showing up in the second half of 2026.

“A top priority for the management team as we enter the year is returning to

full-price sales growth in North America through a series of steps that include the inflection of product newness and reducing the level of markdowns, skew reduction, and the rebalancing of inventory levels,” Frank said.

Frank and chief commercial officer André Maestrini are acting as co-CEOs following Calvin McDonald’s departure on Jan. 31, and Frank said a “robust” search for a new leader is underway.

Sales in mainland China, Lululemon’s second-largest market and a key driver of growth, now make up 15 per cent of the company’s total revenue. Net revenue in the region was US$528 million in the fourth quarter, up 21 per cent year over year on a constant dollar basis, or 28 per cent excluding net revenue from the 53rd week in 2024.

Maestrini also highlighted South Korea as one of the company’s fastest growing markets and said Lululemon has plans for new franchise markets in Greece, Austria, Hungary, Romania and India.

Lululemon expects revenue in mainland China to grow 20 per cent in 2026, and growth in the mid-teens for the rest of its global market.

U.S. tariffs and the removal of the de minimis exemption that allowed shipments under US$800 to enter the States duty-free have also weighed on Lululemon’s margins.

Gross tariff costs in 2025 were US$275 million, though Frank said the company was able to offset about US$62 million through mitigation strategies. In 2026, the company expects a gross tariff impact of US$380 million with about US$160 million in offsets.

Frank said the company is also dealing with higher labour costs, incentive compensation and one-time expenses from its proxy war with Lululemon founder

Chip Wilson . Wilson resigned from the company’s board in 2015 but remains one of its largest shareholders and launched a public campaign last year to revamp the board of directors before it hires a new CEO.

Since leaving Lululemon, which he founded in 1998, Wilson has been a vocal critic of the company’s management, strategic direction and product quality.

In December, he nominated three independent board candidates, to be voted on at the company’s 2026 annual shareholders meeting this summer. He also submitted a non-binding proposal to declassify the board, which would require all directors to stand for election every year.

“Until meaningful change in the boardroom has taken place, success for the new CEO could be a perpetual struggle,” Wilson said in a March 12 open letter addressed to potential CEO candidates.

Lululemon also announced Tuesday that former Levi Strauss & Co. chief executive Chip Bergh will stand for election to its board as private equity executive David Mussafer steps down from his role.

In a press release on Wednesday, Wilson said Mussafer’s departure is “a step in the right direction” but that “glaring governance deficiencies remain.”

“Once again, Lululemon’s quarterly and annual results show the severity and significance of the change I believe is necessary now,” said Wilson.

Lululemon shares were trading higher on Wednesday but have fallen nearly 48 per cent over the last year.

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