Lululemon Faces Uncertainty in U.S. Growth Trajectory, UBS Maintains Neutral Rating

Shares of Lululemon Athletica (NASDAQ:LULU) dropped over 14% on Friday, after the company issued a disappointing annual forecast, citing growing economic uncertainty and potential fallout from renewed U.S. tariffs under President Donald Trump’s administration.

Although the company beat expectations for the fourth quarter—reporting earnings per share of $6.14 and revenue of $3.61 billion, both above Wall Street estimates—investors focused on weaker-than-expected forward guidance, which painted a more cautious picture for the year ahead.

Lululemon now anticipates full-year EPS of $14.95 to $15.15 on revenue between $11.15 billion and $11.3 billion, falling short of analyst forecasts that had pegged earnings and sales higher. For the current quarter, the company expects EPS of $2.53 to $2.58 on revenue of $2.335 billion to $2.355 billion, also below Street expectations.

Executives cited softening consumer spending and declining traffic trends across U.S. retail, as economic concerns and inflationary pressures take a toll on shopper confidence. The company also acknowledged tariff-related headwinds—especially from China and Mexico—as a contributing factor, with 20 basis points of impact baked into its guidance.

Trump’s recently reinstated and proposed tariffs have injected further uncertainty into the retail sector. Lululemon joins peers like Walmart in warning that cost pressures and potential supply chain disruptions could erode demand and margins.

Despite short-term caution, the company is still projecting year-over-year growth, just at a slower pace than previously anticipated. Analysts have flagged weakness in North American operations as a concern, though some—such as J.P. Morgan—described the guidance as appropriately conservative given the backdrop.

• Raymond James downgraded Lululemon (NASDAQ:LULU) from a "Buy" to a "Market Perform" rating due to slowing growth.
• Lululemon's shares dropped nearly 13% in premarket trading following a pessimistic annual forecast.
• The company announced its fiscal 2025 sales forecast to be between $11.15 billion and $11.3 billion, aligning with the higher end of analyst expectations but amidst declining consumer confidence.

On March 28, 2025, Raymond James downgraded Lululemon (NASDAQ:LULU) from a "Buy" to a "Market Perform" rating, expressing concerns over the company's slowing growth. At the time, Lululemon's stock price was $341.53. Lululemon Athletica is a well-known athletic apparel company, competing with brands like Nike and Under Armour. It is recognized for its high-quality yoga and fitness wear.

Following the downgrade, Lululemon's shares experienced a significant decline, dropping nearly 13% in premarket trading. This downturn was triggered by the company's release of a pessimistic annual forecast, reflecting challenges in the broader apparel industry. The inconsistent consumer demand environment and uncertainty surrounding tariffs have compounded difficulties for the sportswear maker.

Lululemon announced its sales forecast for fiscal 2025, projecting revenues between $11.15 billion and $11.3 billion. This outlook aligns with the higher end of analyst expectations. However, the forecast comes amid declining consumer confidence, which may impact performance. Despite strong fourth-quarter earnings and revenue surpassing Wall Street expectations, the company's guidance for 2025 fell short of analyst predictions.

During an earnings call, CEO Calvin McDonald highlighted that a recent survey indicated consumers are spending less due to economic and inflation concerns. This has resulted in reduced traffic for Lululemon and its industry peers. Despite these challenges, McDonald noted positive customer responses to the company's innovations and emphasized focusing on controllable elements amid ongoing macroeconomic and geopolitical uncertainties.

Lululemon's current stock price is $341.53, reflecting an increase of 1.11% or $3.74. Today, the stock has traded between a low of $334.07 and a high of $348.50. Over the past year, LULU has reached a high of $423.32 and a low of $226.01. The company's market capitalization stands at approximately $39.85 billion, with a trading volume of 3,376,189 shares on the NASDAQ exchange.

• Lululemon Athletica Inc. (NASDAQ:LULU) has seen a fluctuation in its consensus price target, reflecting growing optimism tempered by recent market conditions.
• The company's upcoming fourth-quarter earnings report is a key event, with strong sales trends and potential earnings surprises anticipated.
• Despite economic risks and competition, Lululemon's high gross margins and brand loyalty are significant advantages.

Lululemon Athletica Inc. (NASDAQ:LULU) is a prominent player in the athletic apparel industry, known for its high-quality yoga and fitness wear. The company operates through a mix of company-owned stores, direct-to-consumer sales, and a robust e-commerce platform. Lululemon's competitors include Nike, Adidas, and Under Armour, but it distinguishes itself with a focus on premium products and a loyal customer base.

Over the past year, Lululemon's consensus price target has seen a significant shift. A year ago, the average price target was $371.4, which increased to $455 in the last quarter. However, the target slightly decreased to $430 in the past month. This trend suggests growing optimism among analysts about Lululemon's performance, although recent market conditions may have prompted a more cautious outlook.

Lululemon's upcoming fourth-quarter earnings report, scheduled for March 27, is a key event for investors. Despite Morgan Stanley setting a price target of $339, which is lower than the current consensus, the company's strong sales trends and potential earnings surprises, as highlighted by Zacks Earnings ESP, keep investors interested. The report will provide insights into Lululemon's U.S. sales trends and international exposure.

The company's business model, which includes a strong e-commerce presence and expansion into new markets, contributes to the positive sentiment around its stock. However, challenges such as economic risks and competition from Chinese brands could impact long-term growth. Despite these challenges, Lululemon's high gross margins and brand loyalty remain crucial advantages.

Investors should consider these changes in consensus price targets and upcoming earnings as part of their broader analysis of Lululemon's stock. The company's ability to meet or exceed market expectations in its earnings report will be closely watched, especially given the current economic environment and market volatility.

Needham analysts upgraded Lululemon Athletica Inc. (NASDAQ:LULU) from Hold to Buy, setting a price target of $475 on the stock. The change reflects renewed optimism for the company following a challenging year, during which Lululemon shares fell 25%, underperforming the broader market.

Recent indicators suggest that U.S. demand, which had slowed significantly, began to rebound strongly in December. This recovery raises the potential for improved sales momentum in the current quarter. Additionally, the analysts mentioned that Lululemon’s conservative guidance for the fourth quarter, influenced by the compressed holiday season, creates room for an earnings beat, which could further buoy investor sentiment.

Despite a modest recovery in its stock price, Lululemon remains undervalued relative to historical levels, offering a compelling opportunity for multiple expansion if the U.S. market continues to accelerate. The company’s appearance at the upcoming ICR conference in Orlando could serve as a catalyst, with the possibility of a positive preannouncement of fourth-quarter results.

• Lululemon Athletica Inc. (NASDAQ:LULU) reported a higher-than-expected earnings per share (EPS) and revenue in the third quarter of fiscal 2024.
• The company showed significant growth with a 9% increase in revenue and a more than 40% increase in net income year-over-year.
• Despite challenges in North America, Lululemon demonstrates strong global performance and financial health, with a P/E ratio of approximately 24.37 and a current ratio of 1.57.

Lululemon Athletica Inc. (NASDAQ:LULU) is a prominent player in the athletic apparel industry, known for its high-quality yoga and fitness wear. The company competes with other major brands like Nike and Under Armour. On December 5, 2024, Lululemon reported earnings per share (EPS) of $2.87, surpassing the estimated $2.68. The company also achieved a revenue of approximately $2.4 billion, exceeding the estimated $2.36 billion.

In the third quarter of fiscal 2024, Lululemon reported an EPS of $2.87, beating the Zacks Consensus Estimate of $2.68. This was an increase from the $2.53 per share reported in the same quarter last year. The company's revenue grew by 9% to $2.4 billion, surpassing analyst expectations, as highlighted by Zacks. Net income rose by more than 40% to $351.9 million, or $2.87 per share, compared to $248.7 million, or $1.96 per share, from the previous year.

Despite these positive financial results, Lululemon faced challenges with declining comparable-store sales in North America, its largest market. CEO Calvin McDonald acknowledged these challenges, particularly with product "newness." However, he highlighted the company's robust global performance and significant momentum in international markets and Canada. McDonald expressed optimism about the holiday season and emphasized the company's focus on accelerating its U.S. business and enhancing brand awareness worldwide.

Lululemon's financial metrics provide further insight into its market position. The company has a price-to-earnings (P/E) ratio of approximately 24.37, indicating the amount investors are willing to pay for each dollar of earnings. Its price-to-sales ratio stands at about 3.98, reflecting the market's valuation of its revenue. The enterprise value to sales ratio is around 4.02, suggesting how the market values the company's total worth relative to its sales.

Additionally, Lululemon's enterprise value to operating cash flow ratio is approximately 17.44, providing insight into the company's cash flow generation relative to its valuation. With an earnings yield of 4.10%, Lululemon offers a return on investment based on its earnings. The debt-to-equity ratio is 0.35, indicating a moderate level of debt compared to its equity. The current ratio of 1.57 suggests that Lululemon has a healthy level of liquidity to cover its short-term liabilities.

Lululemon Athletica (NASDAQ:LULU) exceeded expectations with its second-quarter earnings, leading to a more than 4% gain in its stock price pre-market today, despite the disappointing revenue projections for the upcoming quarter and full fiscal year.

The athletic apparel giant reported adjusted earnings of $3.15 per share for the quarter, beating analysts' predictions of $2.94. Revenue increased by 7% year-over-year to $2.4 billion, though it slightly missed the anticipated $2.41 billion mark.

Comparable sales rose by 2%, or 3% when adjusted for currency fluctuations. Notably, international sales saw a significant 29% surge, while growth in the Americas slowed to just 1%.

However, Lululemon's outlook for future revenue left investors concerned. The company forecasted third-quarter revenue to be between $2.34 billion and $2.365 billion, falling short of Street expectations of $2.41 billion. The full-year revenue guidance was also lower than anticipated, with a range of $10.375 billion to $10.475 billion, compared to the Street estimate of $10.62 billion.

On a positive note, Lululemon's gross margin improved by 80 basis points to 59.6%, and its operating margin increased by 110 basis points to 22.8%. The company expanded its retail footprint by opening 10 new stores during the quarter, bringing the total to 721 locations.