Lululemon Athletica Inc. (NASDAQ:LULU) is attempting a major reset after a punishing year that saw its share price cut in half prior to its latest earnings release. The company announced that CEO Calvin McDonald will depart on January 31, a significant leadership shake-up intended to address stalling growth in North America.
CFO Meghan Frank and COO André Maestrini have been appointed as interim co-CEOs to guide the retailer while the board conducts a search for a permanent successor.
A turnaround, however, may not come easily for the struggling stock. While Lululemon's total revenue climbed 7% to $2.6 billion in Q3, net income fell to $306.8 million (from $351.9 million) as the brand struggled to maintain momentum in its most established markets. Revenue in the United States and Canada declined by 3% and 1%, respectively, a worrying sign that domestic demand is softening. On the bright side, the brand remains strong overseas, as it experienced a massive 46% revenue jump in mainland China, which has become a critical engine for growth.
Future profitability remains a concern as the company navigates a tougher trade environment. Management expects a 220-basis-point hit to gross margins for the year due to tariffs and the removal of de minimis exemptions, prompting new cost-saving initiatives and strategic pricing adjustments.
The stock is up on the recent developments, as investors appear bullish on the hopes that a change in management could put the company in the right direction. However, turning things around amid such challenging economic conditions won't be easy, and 2026 could still be a tough year for the stock.
