Analysts are moving to the sidelines on Lululemon after the athleisure company’s disappointing full-year outlook. Shares of Lululemon — down 46% this year through Thursday — plunged nearly 20% in early Friday trading after the retailer’s second-quarter revenue trailed expectations and it slashed third-quarter sales and earnings projections. The Vancouver-based maker of yoga pants said it expected tariffs to hit its full-year profits by $240 million. CEO Calvin McDonald told analysts on an earnings call after the latest results that “the increased [tariff] rates and removal of the de minimis provisions have played a large part in our guidance reduction for the year.” Lululemon now sees third quarter earnings per share of $2.18 to 2.23 against a Street consensus of $2.88, on revenue of $2.47 billion to $2.50 billion, versus the Street’s $2.56 billion, according to FactSet’s StreetAccount service. Lululemon management said it plans to improve its product offerings and increase its new styles to 35% of its overall assortment by next spring from 23%. But many analysts are skeptical that a turnaround in Lululemon’s U.S. offerings will come fast enough to warrant a higher valuation for the stock. Take a look at what several big-name Wall Street analysts are saying about Lululemon: Bank of America: neutral from buy, price target $210 from $300 “We thought building newness would help stabilize the comp and that LULU could raise prices to sufficiently offset incremental tariff pressure. Instead, the US turn has been pushed further out and overearning on ecommerce from the use of the de minimis exemption will be unwound,” analyst Lorraine Hutchinson said. Oppenheimer: perform from outperform, removed price target “While we’re encouraged with now even more aggressive efforts on the part of senior leadership to reinvigorate merchandising, particularly in North America, we’re concerned that repositioning plans will take time, and could portend further top- and bottom-line dislocations nearer term,” analyst Brian Nagel said in a note. “We fret that further downward revisions to guidance could be in the offing for LULU.” Nagel’s previous price target on Lululemon was $500. Telsey Advisory: market perform from outperform, $200 from $360 “The sales miss for the quarter and moderation to the outlook for the year is a concern, in our view. LULU’s US performance has been more challenged against a declining activewear market with increased competition,” Dana Telsey, Telsey Advisory Group CEO, wrote in a note to clients. “In the context of the elongated timeline to the US assortment execution work, and given more a more challenging activewear market, possible slowing in China, incremental competition, the potential for increased fashion risk, and ongoing macro/tariff uncertainties, we are downgrading LULU.” Evercore ISI: in line from outperform, $180 from $265 “While LULU has a good history of de-risking the forward quarter, we see several KPIs in the guidance for the year that we don’t think are de-risked enough at this time, especially as: 1) the US continues to decelerate, 2) Canada is currently trending below the FY25 guidance, with LULU citing macro pressure (new competitors like Alo/Vuori accelerated store openings in Canada and it’s hard to shake our hunch that competitive pressure will intensify there similar to the US),” analyst Michael Binetti said. “Most importantly…the gross margin outlook worsened materially.” Stifel: hold from buy, $205 from $324 “Challenges from domestic market pressures and removal of the de minimis exemption are primary drivers of a meaningful cut to FY25 guidance,” analyst Peter McGoldrick said in a note to clients. “Acknowledgment of underperformance within the casual side of the business (40% revenue mix) is a starting point, though reigniting brand momentum in the U.S. is likely to take longer than we had previously anticipated.”
