Where Will Lululemon Stock Be When the Dust Settles?

The search for Lululemon's (NASDAQ: LULU) next CEO is getting messy. Not only was there no clear succession plan when CEO Calvin McDonald announced his impending resignation, but activist investor Elliot Investment Management has built a stake and is pushing a specific pick, and founder Chip Wilson is looking to replace board members before a decision is made.

All of this will be behind the company at some point next year, and the next CEO will then have the task of returning the core U.S. business to growth. While it will take time for any new strategy to take hold, Lululemon stock could surge in 2026 if the new CEO can spin a compelling turnaround story.

Squandering a strong brand

Lululemon is thriving in international markets, but the story is different in the U.S. Comparable sales in the Americas fell by 5% in the third quarter, and overall profits are in decline.

Lululemon allowed its core products to become stagnant as competition intensified. Activewear shoppers have far more choices today than they did a few years ago, and Lululemon hasn't done enough to adapt. Prior to McDonald's resignation, he announced a plan to decrease product development times and refresh the core portfolio for next spring.

The good news is that Lululemon's business is not broken. Lululemon's brand is a powerful force in the apparel market, and customers will likely come back if the company can get its product mix right. That will take time, especially with a potentially drawn-out CEO search process underway.

A stock recovery in 2026 is possible, although the business may not stage a clear comeback until 2027. However, with Lululemon stock trading for around 16 times full-year earnings guidance, investors are getting a good deal to sit and wait for an iconic brand to find its footing.

Timothy Green has positions in Lululemon Athletica Inc. The Motley Fool has positions in and recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.