Lululemon is having a rough year, and it just got worse.

Shares of the athletic apparel maker dropped sharply after the company posted weak second-quarter results and lowered its outlook for the rest of 2026. 

But buried inside the numbers is a smaller story that says a lot about where Lululemon (LULU) thinks its business is heading.

The company is walking away from dozens of one particular type of store.

Lululemon stock drops after weak quarter

Lululemon’s fiscal second quarter (ended in July) revenue fell 4%, and comparable sales dropped 9%. 

Interim Co CEO and CFO Meghan Frank told analysts on the earnings call that negative online commentary hurt store traffic, and that a slowdown in core categories such as leggings was worse than expected.

The company also cut its full-year guidance.

It now expects revenue between $10.35 billion and $10.5 billion for 2026, down from a prior forecast of $11 billion to $11.15 billion, according to CNBC.

Full-year earnings guidance was lowered, too, to a range of $9.48 to $9.73 per share.

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North America revenue fell 8% in the quarter. China Mainland grew just 4% on a reported basis, well below what Lululemon expected, partly because of negative social media chatter and a weaker showing during a major Chinese shopping event.

Lululemon stock slid more than 17% on Sept. 4, 2026, following its disappointing Q2 numbers.

Valued at a market cap of $14.25 billion, LULU stock is now down 80% from all-time highs. 

Lululemon cuts pop-up stores nearly in half

Here is the detail that stands out. 

Lululemon plans to shrink its fleet of pop-up stores from 65 at the end of 2025 to roughly 40 by the end of 2026. 

Pop-up stores are temporary, short-term locations that brands use to test new markets, boost visibility around a launch, or reach shoppers in areas without a permanent store. 

For Lululemon, they have also served as a testing ground. If a pop-up performs well, the company can convert it into a full-time location later.

Frank said on the call that about half of Lululemon’s planned new stores in North America are pop-up conversions, meaning locations that already proved themselves and are being upgraded to permanent status.

So the cut to pop-ups is about becoming more selective. Lululemon is running fewer temporary experiments while doubling down on the ones that already worked.

Lululemon pulls back on its pop-up store strategy.

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What Lululemon’s store plans look like this year

Lululemon shared several updates on its 2026 store footprint. Here is the breakdown, based on the company’s earnings call:

  • Approximately 35 net new company-operated stores are planned for the year, down from about 40 guided last quarter.
  • Roughly 35 “optimizations” expected for the year, the company’s term for relocating, downsizing, or otherwise adjusting existing stores.
  • About 10 of the new stores will be in North America, and seven of those are in Mexico.
  • About 25 new stores are planned for international markets.
  • Pop-up stores will drop to about 40 by year-end, down from 65.

The company ended the second quarter with 825 stores worldwide. Square footage was up 11% from a year earlier, largely because of 41 net new stores added since last year’s second quarter.

Outside North America, the story is more about growth. 

Lululemon reopened its first-ever South Korea store in August with a new design, celebrating a decade in that market. 

It also opened its largest store in the Asia Pacific region in Tokyo’s Harajuku district. In Europe, the company is expanding through franchise stores in Athens and Bucharest.

What the pop-up cuts signal for Lululemon

Meghan Frank, Lululemon’s Interim Co CEO and CFO, said the company is being deliberate about where it puts new stores.

“We will continue to take that posture as we move throughout 2027 as well, really scrutinizing every deal,” Frank explained, referring to the company’s approach to new locations.

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With sales sliding in its two biggest markets, North America and China, the company is not in a position to spend freely on experimental store formats. 

Cutting pop-ups while still opening a small number of new permanent stores suggests Lululemon wants proof a location will work before committing long-term.

For shoppers, fewer pop-ups could mean fewer surprise, limited-time locations showing up in cities where Lululemon does not already have a permanent presence. 

For investors, it is one more sign that the company is tightening spending across the board while it waits for incoming CEO Heidi O’Neill, who joined the company this week, to help chart a new path forward.

Lululemon has not said whether it plans to bring pop-up numbers back up once sales stabilize.

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