Lululemon reported its second quarter in early September and the market spent about fifteen minutes deciding what it meant. The stock fell 18% and briefly traded under $100. Sales in the Americas, still more than half the business, dropped 8%. China grew 4% as reported and shrank 2% once currency comes out, which matters because China was supposed to be the cushion.

The earnings line beat expectations. It beat on the back of an 86-cent benefit from a tariff refund, and you can’t run that play twice.

Then management cut full-year guidance for the second time this year, taking revenue down toward $10.35 billion. Two days later BMO Capital Markets opened coverage with an underperform rating and said the recovery would be neither quick nor cheap. The shares were already down roughly 81% from their peak. Heidi O’Neill had been chief executive for three days.

The category is fine. The company isn’t.

The easy read is that athleisure peaked and everyone is going down together. The data says otherwise.

Teen preference surveys have athletic apparel gaining, not fading; in the most recent fall reading, athletic styling was the top fashion category for 45% of female teens against 38% a year earlier. The US athleisure market is still forecast to compound at around 7%. Vuori raised money at a $5.5 billion valuation. Alo has crossed a billion dollars in annual sales. Fabletics is growing. Gap put Alo’s former president in charge of Athleta.

So the category kept expanding and Lululemon didn’t. That’s a share problem, and a share problem has a culprit you can name.

The legging shrank while the category grew

Look at what happened to the garment itself. Leggings accounted for 39% of activewear bottoms assortments by early 2025, down from 47% in 2022. Retailers cut the buy because the sell-through told them to. At Outdoor Voices, cargo bottoms started outselling the brand’s own leggings.

Leggings didn’t die. Stirrups, bootcut, flare and capri shapes are all having a moment, and matte black is still the most-worn bottom in the Western wardrobe. What died is the idea that one pair of $100 compression leggings in a recognisable logo is a complete outfit. The look now needs a second decision: a structured top, a real shoe, a coat that isn’t a hoodie.

That’s an awkward shift for a company whose entire premium was built on a fabric. Lululemon sold Luon and then Nulu and then Align, and taught a generation that the technical feel justified the price. Fabric is a product story. Silhouette is a fashion story. Those require different companies.

Alo sells the feed, Vuori sells the wardrobe

The two brands taking the most ground aren’t doing the same thing.

Alo plays cultural relevance. Stores in the neighbourhoods where the photos get taken, a ready-to-wear line, relentless content volume, and a clear read on the customer who wants the outfit to look deliberate. Footfall trackers have Alo’s same-store visits up year on year across a young store base while Lululemon’s declined across a much larger one. Roughly 63% of Alo’s shoppers also buy Lululemon, which tells you exactly where the incremental dollar is coming from.

Vuori plays the opposite hand. Bottoms-heavy, quiet branding, men’s performance roots extended into women’s pants, plus a serious wholesale network from day one. Vuori shoppers keep raising the share of their activewear budget they spend there. It isn’t trying to be the most photographed brand in the category. It’s trying to be the one you own eleven pieces of.

Underneath both sits the dupe economy. Halara and its peers will sell you an Align lookalike for a quarter of the price, and enough people have tried one and shrugged that the fabric premium no longer defends itself.

What O’Neill actually inherits

Not a brand crisis. A pricing-power crisis.

Lululemon’s economics only work at full price. Sales per square foot above $1,400, gross margin near 56%, return on equity in the thirties. Every one of those numbers assumes the customer doesn’t wait for markdown. Once promotion becomes habit, the model stops being special and starts being Under Armour, which went from 6.3% category share in 2016 to 3.5% by 2024 and never got it back.

The company’s own response so far is assortment. Refreshed Scuba and Softstreme, new lines like Loungeful and BeCalm, and a plan to lift new styles from 23% to 35% of the range. That’s the right instinct and probably not enough on its own, because newness fixes an inventory problem and this is a desirability problem.

The test is narrow and it’s measurable. Does Americas comp turn positive on full-price selling, or on discount? Everything else is noise.

Two guidance cuts in one year is a company telling you it doesn’t know where the floor is yet.

• Lululemon
• Alo Yoga
• Vuori
• activewear
• athleisure
• retail