$1B case study: How Lululemon lost its edge

Hey everybody,

I’ve been doing a bunch of business failure case studies on my YouTube channel. Tons to learn from things that go wrong.

This one is on the risks of losing focus — and how even an “untouchable” brand can fall behind.

Let’s look at Lululemon.

Lululemon practically invented athleisure.

Premium yoga wear that doubled as everyday armor. A brand that meant something.

When they launched in 1998, perfectly timed with yoga’s global boom. By 2007, they’d IPO’d at a $1.4B valuation. By 2020, they’d crossed $4B in annual revenue.

And they had a near-flawless playbook:

It wasn’t just clothing. It was an identity.

And for years, it worked.

But they weren’t invincible.

In 2013, the infamous “see-through pants” recall cost them $67M and some serious credibility.
Then founder Chip Wilson made things worse by blaming the pants problem on women’s bodies, which ultimately forced his resignation. 

The brand now had baggage.

The problems weren’t just PR. 

Behind the scenes, the CEO seat turned into a revolving door. Each new leader had a slightly different vision. Stability vanished.

Then came the Mirror debacle. In 2020, they dropped $500M on a fitness-tech company that made smart mirrors for at-home workouts. 

It was a bold bet, but terrible timing. Because as soon as gyms reopened, demand cratered.

By 2023, Lululemon had to write off nearly the entire investment—$443M down the drain.

That’s lesson #1: Don’t chase fads.

Stick to what you're great at. For Lululemon, that was stylish, functional apparel. Not gadgets.

But the bigger threat wasn’t inside the company. It was outside.

Because the market was moving on. Fashion shifted towards baggy styles, wide-leg pants, and oversized silhouettes. Tight-fitting gear started looking a little dated.

Which brings on lesson #2: Even the best brands have to keep evolving. 

Lululemon isn’t leading the charge anymore. 

Nike and Adidas have turned up the heat. Upstarts like Vuori and Alo have stolen the cool factor. 

And just last month, Lululemon sued Costco for selling “knockoff” activewear… which is turning into a ton of free marketing for Costco.

Even longtime fans are saying what no brand wants to hear: This all feels kinda stale.

Today:

In March 2025, they slashed growth forecasts and the stock tanked 11% in a day. It's now down nearly 40% from its peak.

They’re not out of the game by any stretch. But instead of making moves from first place, they’re playing catchup.

It’s easy to play armchair CEO. But distance also gives you perspective.

When your company loses focus, it’s almost impossible to stay on top. (How many mountains can you climb at once?) 

And when you’re scrambling in the now, you’re not looking ahead. 

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How did you like today’s email?

Hit reply and let me know!

Michael

P.S. I’ve got a bunch of free lectures coming up. Just added a new one to the lineup!

Oct 29 — Buying a Business in 2026 w/ Chelsea Wood of Acquisition Lab