Lululemon’s stock is experiencing significant declines in premarket trading following disappointing quarterly earnings and a troubling outlook. Analysts and retail insiders have expressed dissatisfaction with Lululemon’s recent product offerings, noting a lack of compelling items that have historically driven sales.
Concerns are mounting over the company’s performance, particularly in the domestic market. Analysts are pointing to several factors contributing to a substantial revision of the fiscal year 2025 guidance. Among these are pressures from the domestic market and changes in regulatory exemptions, which are expected to result in a projected 4.4% decrease in second-half revenue and a stark 22% drop in earnings per share (EPS) at the midpoint of estimates.
Stifel analyst Peter McGoldrick highlighted that recognizing the underperformance in the casual sector—which constitutes 40% of Lululemon’s revenue mix—is a necessary step. However, he cautioned that revitalizing brand momentum in the U.S. will take longer than anticipated, given the current challenges.
Jefferies analyst Randy Konik added to the bleak picture, stating that with sales per foot significantly exceeding mall averages and margins at peak levels, the fundamental outlook for Lululemon is likely to deteriorate further. He emphasized that the U.S., as the primary driver of Lululemon’s earnings, is currently witnessing a decline that will impact financial performance. Konik also noted that the guidance provided by the company may not be pessimistic enough, predicting continued rising competition that could impair Lululemon’s earnings per share in a more permanent manner.
As the retail landscape shifts and competition intensifies, analysts continue to adjust their expectations for the brand, indicating that a reduced valuation may be necessary to reflect the challenges ahead.
