Lululemon Athletica is confronting a significant trust crisis. The athletic brand, which has seen sluggish performance in the U.S., has been dealt a heavy blow.
Texas Attorney General Ken Paxton announced that a subpoena has been issued to Lululemon’s U.S. division, initiating an investigation into whether its products contain "forever chemicals." These chemicals primarily refer to per- and polyfluoroalkyl substances (PFAS). In a statement released on the 13th, Paxton noted that recent studies and consumer concerns have raised questions about whether Lululemon’s products may include certain synthetic materials and chemicals linked to endocrine disruption, infertility, cancer, and other health issues. The investigation aims to determine whether Lululemon has misled consumers regarding product safety, quality, and health impacts.
In response, Lululemon stated that it had previously used related substances in a small number of waterproof items but phased them out during the 2023 fiscal year. The company emphasized that its products do not contain PFAS.
As for whether similar issues exist in China, the brand’s Chinese division responded that all products currently sold in the domestic market are free of PFAS and comply with relevant laws, regulations, and national industry standards.
Some analysts believe that, in the short term, this incident will amplify fluctuations in the brand’s stock price and public sentiment. On a deeper level, the credibility of the brand’s narrative has been weakened, which may undermine the pricing foundation of its high-end lifestyle positioning.
Compounding Challenges in North America According to the U.S. Centers for Disease Control and Prevention, PFAS encompass a group of over 14,000 synthetic chemicals widely used in industrial production and consumer goods, including textiles, firefighting foam, medical devices, coatings, personal care products, and construction materials. Exposure to certain PFAS has been associated with various health risks, including increased cancer likelihood, elevated cholesterol levels, and effects on the immune system.
Why did the quality issue emerge from Texas? Industry insiders pointed out that Texas is known as a "strong enforcement state" in the U.S., with rigorous corporate oversight. The broader context is that U.S. regulations on PFAS have been tightening in recent years, evolving from an environmental concern to a consumer safety and health risk issue. In other words, Lululemon is not the first to be implicated; rather, the PFAS sector has come under increased regulatory scrutiny.
From the perspective of Chen Jingjing, founder of Jingjie Brand Consulting, the PFAS issue has gained traction in the U.S. in recent years, becoming a prominent public topic affecting sectors such as outdoor apparel, cosmetics, and food packaging. Against this backdrop, Lululemon’s investigation appears to be a case of a high-profile brand being singled out in a specific regulatory environment. Its well-known "health/sustainability" brand narrative makes it particularly vulnerable to heightened scrutiny and rapid public attention if perceptions do not align with reality.
Chen noted that the investigation also serves as a warning to the industry: terms like "eco-friendly" and "healthy" can no longer be used as vague marketing language but must be verifiable and consistent.
According to financial reports, North America remains Lululemon’s most important and largest market, accounting for approximately 70% of the company’s total revenue.
In March of this year, Lululemon released its fourth-quarter and full-year results for fiscal 2025. The company reported fourth-quarter revenue of $3.6 billion, a 1% year-over-year increase, while full-year revenue reached $11.1 billion, up 5%. However, performance in North America was weak, with fourth-quarter revenue down 4% and full-year revenue declining 1%. The poor sales in its primary market led to an 11% drop in the company’s stock price following the earnings announcement.
Chen believes that, coupled with a significant stock price correction over the past year, the departure of the brand’s CEO earlier this year, and public criticism from its founder, confidence among markets, investors, and internal teams has already been under pressure. In the short term, this incident will further amplify stock and sentiment volatility. More profoundly, the erosion of the brand’s narrative credibility may shake the foundation of its premium lifestyle pricing. In the medium term, valuation logic may shift from "brand premium-driven" back to that of a "functional apparel company," prompting markets to reassess the justification for its premium positioning.
Bright Spot in International Markets While North American performance remains sluggish, Lululemon’s international business has shown strong growth: last year, international revenue increased by 22% year-over-year. Particularly noteworthy is the performance in the Chinese market, where revenue grew by 29%, significantly above the average.
For the full-year guidance of fiscal 2026, Lululemon expects revenue in China to increase by approximately 20%. The first quarter has maintained positive momentum, with projected revenue growth of 25% to 30% year-over-year.
The company clearly views the Chinese market as a priority. During a media briefing at last year’s China International Import Expo, Huang Shanyan, Managing Director of Lululemon China, stated that China is one of the fastest-growing regions in the brand’s global portfolio and has become its second-largest market worldwide. She revealed that the brand operates over 170 stores in China, nearly all of which are directly managed.
For fiscal 2026, Lululemon plans to open 40 to 45 new company-owned stores globally, with 25 to 30 of those located in international markets—the majority of which will be in China.
Regarding whether products sold in China are involved in the harmful substance allegations, the company’s Chinese division denied any relation.
On the consumer side, visits to Lululemon stores in Shanghai’s Taikoo Hui on West Nanjing Road and IAPM on South Shaanxi Road revealed a steady flow of shoppers even on a weekday afternoon.
Having been in the Chinese market for over a decade, Lululemon has cultivated a loyal following in first-tier cities. Kelly, a white-collar worker in Shanghai, is a long-time customer who owns more than ten items from the brand. She mentioned that she is aware of the recent reports and will keep an eye on product quality issues. "I’ll continue wearing what I’ve already bought, but I’ll hold off on new purchases for now."
Despite maintaining growth in China, Lululemon still faces challenges. "In the Chinese market, Lululemon is contending with rapid expansion and competition from emerging brands like Alo Yoga and Vuori, as well as systematic pressure from local brands in terms of pricing, content, and product suitability," Chen Jingjing noted. While the brand’s accumulated awareness and customer loyalty remain a solid foundation, this incident may weaken the stability of its premium narrative and further impact its appeal among younger consumers.
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