Numerous analyst reports indicate that Lululemon is discontinuing its newest Breezethrough leggings in response to mixed customer feedback.

The leggings line, featuring a hydrogen yarn, was released on July 9.

The Breezethrough collection, aimed at hot, low-impact workouts, faced criticism over the design, with a 3.1-star rating from 112 reviews on Lululemon’s site, with comments highlighting issues like unflattering seams and discomfort.

Shares of Lululemon closed down $24.74, or 9.1 percent, to $247.32 Thursday, July 25, on the New York Stock Exchange.

Jim Duffy, an analyst at Stifel, said Lululemon removed the Breezethrough leggings line from its merchandise assortment after listening to customer feedback.

“The product team will reportedly incorporate improvements into future versions of the offering,” said Duffy. “While Breezethrough reviews were mixed though leaning positive, LULU holds high standards for performance and has decided it best to relaunch with improvements, we presume, in Spring/Summer 2025. Unfortunately, reacceleration of North America is central to a narrative shift for the stock, and Breezethrough was part of the newness contribution we expected to benefit comps late 2Q and into FY2H.”

Duffy reiterated his “Buy” rating at a $416 price target. He wrote, “We don’t see this change material to long-term value and maintain our BUY rating. With our quarterly preview, we will assess and adjust FY24 estimates if appropriate.”

JPMorgan analyst Matt Boss slashed his 2024 earnings estimates and removed the stock from his Analyst Focus List on the news. JPMorgan’s price target on Lululemon was reduced to $338, down from a previous $457.

Boss noted that customers found the collection unflattering with its “V” shaped back seam and “U” shaped front seam. He said the Breezethrough line was expected to drive growth in Lululemon’s women’s leggings category through the second half of 2024, and the pause in sales “compounds recent in-stock/color palette ‘execution’ concerns.”
As a result, JPMorgan has lowered its second-half revenue growth estimate on Lululemon to 8 percent, below the street’s forecast of 13 percent.

BTIG’s Janine Stichter said Lululemon will be making “design adjustments,” but the consensus seems to be that the construction of the leggings – specifically the front seam – and unflattering look are the main reasons for its poor reception.

Stichter on Thursday in a note lowered her price target on Lululemon to $360.00 from $425.00 while maintaining a “Buy” rating due to sales and margin pressure towards the end of the second quarter.

She wrote in a note, “We adjust our go forward estimates and price target. We move our Q2 EPS estimate to $2.92 from $2.97, at the lower end of guidance of $2.92-$2.97, to account for some additional sales and margin pressure toward the end of the quarter. We adjust ’24 to $14.02 from $14.46, below guidance of $14.27-$14.47, now assuming a relatively steady trend in the Americas in H2 (vs. the slight acceleration we had previously embedded), and GM now down 30 bps YoY vs. guidance of flat to account for additional markdowns/product write-offs. Our revised price target of $360 (from $425) assumes shares trade at 23x P/E and 14x EV/EBITDA on our 2025 estimates (from 26x and 16x, respectively, previously) with the lower multiple to account for the increased uncertainty around execution risk. These multiples are a discount to historical levels, but a premium to current levels.”

Citi on Thursday downgraded Lululemon to “Neutral” from “Buy” with a price target of $300, down from $415. Analyst Paul Lejuez issued the downgrade before the news of the pulling of the leggings line.

Lejuez wrote in a note, “After years of benefitting from outsized growth in active apparel, trends in the category have slowed in F24 with Citi’s credit card data in Yoga & Active apparel pointing to a further decel 2Q QTD vs 1Q (which was a big decel vs F23). This dynamic, coupled with LULU’s execution issues (lackluster product assortment/lack of color/sizing), leave LULU more susceptible to increased competition and promotional pressures in 2H24/F25. We believe category weakness and a tougher macro backdrop make it unlikely LULU sees a reacceleration in US trends in 2H, and we are lowering our F24/F25E from $14.44/15.94 to $13.77/14.05. Additionally, while LULU has performed extremely well in China over several years, incremental weakening of the Chinese consumer environment is an added risk to the stock (and expectations remain high on China growth).”

Image courtesy Lululemon