Lululemon (NASDAQ: LULU) is having a tough year. And unfortunately, its latest batch of earnings aren’t helping. Instead, they sent the stock down about 18%, or by $22.12 last night. All after the company reported another disappointing quarter and, more importantly, significantly lowered its outlook for the rest of the year.

The results mark another setback for a brand that was once one of the biggest success stories in retail. Lululemon built a powerful following around its leggings, yoga clothes and premium athleticwear, but lately, the company has struggled to keep customers as excited about its products as they once were.

For the second fiscal quarter, Lululemon reported revenue of $2.42 billion, falling short of Wall Street’s expectation of $2.46 billion. Revenue declined 4% from the same period a year earlier, while comparable sales dropped 9%. 

That is a pretty significant slowdown for a company that has spent years posting strong growth.

And this wasn’t Lululemon’s first warning sign. The retailer had already lowered its guidance during the previous quarter.

However, a new CEO could help boost the stock.

Lululemon’s incoming CEO, Heidi O’Neill, is set to take the reins next week. Her arrival comes at a critical moment for the company, as it tries to regain momentum in two of its largest markets and rebuild its connection with customers. 

The company clearly still has a recognizable name, a large customer base and a strong position in athleticwear. But recent results suggest that brand strength alone may not be enough.

Customers want fresh products, and they want a reason to come back. Lululemon’s challenge is figuring out exactly what that reason should be.

With a new CEO arriving and management promising new styles, tighter inventory and a renewed focus on customers, the retailer is betting that it can turn things around.

Sincerely,

Ian Cooper