Lululemon Flubbed the Quarter, and the Founder Won't Say a Bad Word

Lululemon Athletica (NASDAQ:LULU) reported first-quarter 2026 earnings, and the news wasn't very good. While the top line grew 4% and same-store sales rose 1%, those numbers mask material weakness in the company's most important market. However, Chip Wilson, the company's founder, isn't likely to discuss any of it because he got what he wanted a few days before the earnings release. Here's what you need to know.

How bad was Lululemon's quarter?

Lululemon's top line grew 4%, but that was driven by international sales, which rose 22%. The athletic clothing retailer's far larger and more important Americas business suffered a 3% sales decline. Same-store sales followed a similar trend, with international same-store sales up 13% and Americas same-store sales down 5%.

Image source: Getty Images.

The company believes part of the problem was negative consumer sentiment toward the brand, driven at least in part by a public proxy fight with founder Chip Wilson. That said, it also highlighted product launches that didn't meet company expectations. The proxy fight was settled roughly a week before the earnings release, giving Wilson two board seats and requiring the founder to stop publicly discussing the company in a negative light.

Wilson had been openly complaining about Lululemon's poor business execution. The first-quarter results seem to back up those assertions. Notably, gross profit margin fell 4.1 percentage points. And earnings per share of $1.69 fell materially from the first quarter of 2025, when they totaled $2.60.

Lululemon isn't likely to turn things around quickly

The agreement with Wilson will bring fresh perspectives to Lululemon. However, the company's most important change is likely to be the appointment of a new CEO. The pick has already been announced as Heidi O’Neill, a well-respected leader with experience at Nike (NYSE:NKE). The only problem is that the new CEO won't actually join Lululemon until September.

That leaves Lululemon with temporary leadership still running the show. It isn't that the current leadership is inherently bad. The problem is that the incoming CEO, O'Neill, could dramatically change the company's direction. There's no way to know until she comes on board, which makes it hard for investors to assess the company's longer-term outlook.

The next quarter won't be good

That said, Lululemon was very clear that the second quarter will, in fact, be weak. The athletic apparel company's sales are projected to fall between 2% and 3%, with earnings per share between $1.76 and $1.81, down materially from $3.10 in the second quarter of 2025. The company also lowered its full-year guidance.

Chip Wilson probably won't be commenting on any of this, though his board representatives are likely to have plenty to say in the next board meeting. That, in the end, is likely better for the company over the long term. Investors, meanwhile, are left to play a waiting game. Given the ongoing weak performance and the uncertainty about the company's direction with the new CEO's arrival still months away, only more aggressive investors should probably be looking at the stock right now. It could have compelling turnaround appeal, but it is not yet clear how that turnaround will take shape.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. and Nike. The Motley Fool has a disclosure policy.