Lululemon shares drop after CEO change amplifies ongoing brand reset efforts

Shares of Lululemon Athletica Inc (NASDAQ:LULU) fell nearly 12% on Thursday after the athletic apparel maker named former Nike executive Heidi O’Neill as its new CEO, as the company looks to revive its US business amid weakening sales and rising investor pressure.

O’Neill previously served as Nike’s president of consumer, product & brand.

The leadership change comes at a difficult moment for the company, which has seen its market value shrink to roughly $20 billion from a peak of about $67 billion in 2023, as growth in its core North American business has slowed and competition has intensified.

Alongside the CEO transition, Lululemon has been pushing broader revamp efforts, including new product launches under creative director Jonathan Cheung and plans to reconfigure its store footprint in an effort to improve the customer experience and lift traffic.

However, some analysts remain cautious about the timing and effectiveness of the leadership shift.

In a note, Jefferies said it was “too soon to say” whether O’Neill is the right fit, arguing that structural challenges at the company remain unresolved. The brokerage pointed to ongoing investor disputes, weak productivity trends, and questions around whether the brand reset is sufficiently focused.

Jefferies highlighted an ongoing proxy fight led by founder and major shareholder Chip Wilson, who is seeking to replace three board directors. Wilson has argued that the board lacks sufficient product and brand expertise and mishandled CEO succession following the departure of Calvin McDonald. The contest is expected to come to a head at Lululemon’s 2026 annual shareholder meeting.

The company has also recently added former Chip Bergh, the longtime CEO of Levi Strauss & Co, to its board, signalling a push to bring in more experienced apparel industry leadership as it navigates the turnaround.

Jefferies said the leadership changes do not resolve deeper operational concerns, noting that productivity remains elevated and may not be sustainable. The firm added that US store performance and sales per square foot, while still strong relative to peers, are showing signs of normalization, raising the risk of further earnings pressure.

“Without a reset around the core product, tighter inventory discipline, and a credible plan to stabilize the Americas, we expect fundamentals to worsen before they improve,” Jefferies wrote.

Despite the challenges, O’Neill’s appointment is being viewed as a bid to strengthen product focus and brand cohesion. Analysts say her success will likely hinge on whether she can restore discipline to Lululemon’s product pipeline and re-energize the company’s core customer base in its most important market.