Stretched Thin: Lululemon’s Yoga Legacy Falters Against Founder’s Ambitions

Lululemon got women halfway around the world to pay a hundred dollars for leggings, to wear them to practice yoga or to go shopping for bread. Admired for years as the new star of sport, standing up to Nike or Adidas, the Canadian company is losing the stretch that characterizes its garments, unable to adapt to new generations, to react to the ups and downs of the trade war and to resist discounts to revive its sales. If its founder, Chip Wilson, predicted that yoga would reign, now the entrepreneur is relying on another type of fashion.

Dennis J. Wilson, nicknamed Chip, was born in April 1955 in Los Angeles, California. Although intimately connected to sports (his father was a soccer player and his mother a gymnast), Winson’s parents ended up working at UPS, one, and at home sewing, the other.

When he was five years old, the family moved to his father’s hometown of Calgary, Alberta, Canada, where he finished school and began competing in swimming until he moved to Edmonton in 1973 to attend university. Without finishing school, Wilson moved in 1979 to Alaska to work in the oil industry. “I read the 100 greatest books of all time while trading my life for money,“ he has explained about his time in Alaska.

In 1979, Wilson started his first company, a sportswear brand specializing in surfing, skateboarding and snowboarding (sports that were just starting to take off at the time) called Westbeach Snowboard. In 1997, the entrepreneur sold Westbeach and founded Lululemon, driven by the idea that more comfortable and specialized clothing was needed for women’s sports, especially yoga. Lululemon’s goal was to create garments that women could feel beautiful while doing sports, something that most brands did not take into account at the time.

After founding his first company, Westbeach, entrepreneur Chip Wilson sold it to found Lululemon in 1997

In 1998, Lululemon (a word with no meaning but many L’s, which makes it sound exotic, according to its founder) was launched in Vancouver with the idea of creating a new category and, two years later, opened its first store. Lululemon has positioned itself strongly among the female public, coexisting with its customers beyond the sport, reaching the point of worship.

The same year it was founded, Lululemon wrote its manifesto, a text that captures the brand’s strong values. “Creativity is maximized when you live in the moment”, “do one thing that scares you every day”, “stress is 99% related to illness” or “what you do to the earth you do to yourself” are some of the principles.

“In 1998, the manifesto was created in 30 minutes with pencil and paper from a compilation of life experiences, the readings of the books Good To Great, The 7 Habits of Highly Effective People, Psicologí The Manifesto was the main reason people came to work at Lululemon, which in turn created a strong, cross-functional culture,“ says the founder. “The Manifesto was so popular that I decided to print it on the side of the first recyclable shopping bags,“ he recounts; “I think the combination of a reusable bag and the manifesto created one of the best marketing projects of all time.

Wilson remained in charge of the day-to-day management of the company until 2005, when he sold 48% of the equity to Advent International and Highland Capital Partners. When it had a turnover of around $270 million, Lululemon went public, taking 18.2% of its capital to the market and raising $327 million.

In 2005, Wilson sold 48% of the capital of Lululemon, which went public with a turnover of $270 million

The company then began an accelerated growth phase (it opened its first store in Europe in 2014 and its margins shone against those of its competitors thanks to the weight of retail), not without controversy, including the resignation of its founder as president after some controversial statements. “Some women’s bodies just don’t work for our product,“ he said.

The founder continued to disassociate himself from Lululemon and, in 2014, sold his 13.85% stake to Advent for $845 million. Criticism of the company, however, has been constant, attacking everything from the composition of the board of directors to the direction of the brand.

With 784 stores and 39,000 employees worldwide, controversy has surrounded the brand for years, but it is only now that results have begun to suffer. Lululemon again closed 2024 with record sales: it achieved sales of $10.6 billion, with 10% growth thanks to new openings, but sales in its largest market, the United States, began to suffer. In the first quarter, the situation was repeated: the company grew by more than 7%, but sales in the United States were negative.

As a result of this decline, the company has progressively lost value on the stock market. Since September last year, Lululemon has lost 39.7% of its value on the stock market, from $265.3 per share last year to the $159.8 at which the company’s shares closed at the end of last week’s trading session.

The value of the company’s shares, in fact, is at yearly lows, with last Friday’s figure being the lowest in the last twelve months. On the other hand, the Canadian company’s shares reached their highest value in the last year not so long ago, on January 30th of this year, when each share of the company’s stock counted for $421.16.

The company’s shares reached $400 as early as the beginning of the year, when after several months of rises, they stood at $400.03 per share at the close of trading on January 24th this year. Lululemon continued to rise on the stock market, albeit with some interruptions, until early June, when the company’s shares finally fell back below $300, where they remain to this day.

Lululemon’s value is at yearly lows, despite having reached its highest value on January 30th of this year

Lululemon took a particular hit in the stock market several weeks ago, with the presentation of its results for the second quarter of the current fiscal year. Despite the overall rise in results, Lululemon’s U.S. sales stagnated and grew just 1% in Canada, its home market. “We were disappointed with the results of our U.S. business and some aspects of our product execution,“ admitted Calvin McDonald, the company’s CEO.

This poor performance in two of its main markets was also accompanied by a reduction in its annual sales forecasts, which it put at between $10.85 billion and $11 billion. The market punished the company on the stock exchange that same day, with a fall of almost 4% in its stock market value, from $206.09 per share to $198.53 in one day.

Since the annual results presentation, the company has justified the change in trend in the United States by the instability in consumption created by the Trump administration, while analysts point out that, quite simply, the Lululemon phenomenon may have reached its ceiling. Coming out of the gym and onto the street, Lululemon has played at making fashion. And fashion goes out of style.

“They’re putting out products that their core customers look at and say, ‘Who’s going to wear that?” a Jefferies analyst recently said in remarks picked up by The Economist in reference to the brand’s pivot to try to appeal to younger consumers.

Among the new generations, the same thing that boosted them is now hurting them. Lululemon grew in the heat of customer recommendations, using female users as their image as opposed to celebrities. Today, with brands like On carving out a strong niche in the sports sector and big names like Nike as image kings, investment in marketing is more relevant than ever.

Slim silhouettes have given way to oversize fashion and going out in leggings is no longer mandatory as it once was. At the end of 2023, the founder of Lululemon made his fashion prediction, just as he once dreamed that yoga would take hold among women.

“I think I’m right in the middle of the biggest change in the way people dress in the history of the world,“ the entrepreneur said. He wasn’t talking about Lululemon, but Amer Sports, which he entered in 2019 with a 21% stake thanks to the funds he raised from the sale of his shares in the yoga company. And Amer Sports (with a capitalization of $20.7 billion versus Lululemon’s $19 billion and brands such as Arc’teryx, Salomon or Wilson) makes everything but comfortable clothes for practicing yoga or going for a coffee.