The Vancouver, British Columbia–based retailer posted its first revenue miss in over two years on Thursday and lowered its guidance.

Lululemon experienced a rocky quarter as it navigated changing consumer needs, as well as disappointment with its “Breezethrough” yoga pants. While the product promised breathable fabric specifically for hot yoga and pilates, the V-shaped seams on the pants gave the appearance of “long butt” and an unflattering silhouette, consumers said. The company pulled the pants from shelves in July, only weeks after they were launched.

“While guests were excited by the fabric, the design didn’t meet their expectations,” CEO Calvin McDonald said in the earnings call. “Listening to our guests is central to who we are and how we grow our brand, and we took the right step of pausing on sales and look forward to reintroducing the fabric in the future.”

He added the Breezethrough fiasco had a “negligible impact” on the company’s earnings, particularly as the company did not buy heavy inventory of that particular line of product.

However, beyond Breezethrough, McDonald admitted Lululemon failed to fully capture the U.S. market, failing to provide enough colors and sizes in its inventory, and providing an array of narrow leggings in a time when wider-legged, baggy pants and shorts have come into fashion.

While earnings topped views, revenue grew 7% to $2.37 billion last quarter, missing Wall Street’s expected $2.41 billion, with comparable sales in the U.S. down 3%.

The company also trimmed its full-year revenue forecast to $10.38 billion–$10.48 billion from $10.7 billion–$10.8 billion.

Lululemon’s weaker-than-expected quarter wasn’t helped by decreasing interest in leggings overall. As racket sports and running gain popularity, so, too, do shorts and matching sets, according to Jessica Ramírez, senior research analyst at Jane Hali & Associates.

And with more workers returning to the office, there’s less of a need for comfortable leggings. Instead, employees are embracing the chicer silhouettes that are more workplace-appropriate. 

Breezing through the Breezethrough blunder

But there’s good reason to believe Lululemon will bounce back, she added. The company has come a long way from its 2013 release of unintentionally see-through black yoga pants. Shortly after the pants were recalled, investors filed a class action lawsuit against the company, alleging it issued “false and misleading statements” to cover up the costs it sunk into the product. Then CEO Christine Day left the company amidst the debacle, though Lululemon eventually prevailed in the class-action suit.

McDonald, who took Lululemon’s helm in 2018, has steered the company toward becoming a lifestyle brand and has garnered a loyal customer base, Ramírez said. Partnering with skin care brand Supergoop and activity and sleep tracker Oura Ring, it’s been able to keep customers interested, even as it tries to refresh its inventory. In the earnings call, McDonald mentioned “fast-tracked” innovation and a push toward shorts, tracksuits, and tops, aligning with changing consumer interests.

But a shift away from leggings hasn’t stopped athleisure competitors like Alo Yoga and Vuori from gaining market share by offering silhouettes that are versatile and back-to-work-appropriate. Moreover, UBS analysts are not convinced Lululemon will recover overnight, targeting spring 2025 as a turnaround point as they wait to see if the company can reengage consumers who aren’t looking for leggings.

“We think the stock will be rangebound until the market can determine if LULU can deliver on its promised innovation pipeline and re-engage its Americas consumers,” they wrote in a note Thursday. “We doubt an answer emerges for at least another 2 quarters.”