Lululemon Athletica Inc. incurred two analyst downgrades and saw numerous other analysts slash their price targets on its stock after the retailer slashed its annual profit forecast and ‌projected second-quarter earnings well below Wall Street estimates.

Lululemon’s updated guidance calls for:

  • Q2 revenue to decline in the range of 2 percent to 3 percent against consensus expectations of growth of 2.8 percent, marking the first quarterly sales decline since the pandemic. North America is expected to fall into the low double digits in the second quarter, a deterioration from the 5 percent decline seen in the first quarter and the 2 percent decline in the fourth quarter.
  • Second-quarter profits are expected in the range of $1.76 and $1.81, compared with analysts’ average estimate of $2.68.
  • Fiscal 2026 revenue is projected to be flat to decline 1 percent, compared with its prior forecast of a 2 percent to 4 percent increase.
  • Full-year earnings per share to be between $10.95 and $11.15, versus $12.10 to $12.30 projected earlier.

In reporting first-quarter results Thursday evening, June 4, Lululemon (LULU) said some product launches underperformed expectations, and amplified social media criticism reduced customer traffic in North America in April and May. To revive sales, Lululemon plans to reduce SKUs in-store by 15 percent to better highlight innovation, chase 20 percent more volume this year relative to last year to better react to demand signals, increase investments in marketing to drive brand heat, and improve in-store visual merchandising.

Heidi O’Neill, the former Nike executive who joined Lululemon as CEO in September, is reportedly aligned with the action plan.

Shares on Friday, June 5, fell $10.69, or 8.6 percent, to $114.23 following the release of results on Thursday evening. The stock was at $207.81 at the start of the year, its 52-week high, and its all-time peak of $511.29 set in late 2023.

The once-perennial Wall Street favorite has seen most analysts downgrade the stock since Lululemon’s sales began slowing in late 2024. According to FactSet, Lululemon’s coverage on Wall Street includes three “Buy” ratings, 27 “Hold” ratings, and two “Sell” ratings.

Among those downgrading the stock following the release of first-quarter results, BTIG downgraded Lululemon to “Neutral” from “Buy,” citing deteriorating sales trends, reduced earnings visibility, and uncertainty ahead of a leadership transition. Analyst Janine Stichter also removed the specific price objective from the downgrade. Her previous price target has been $225.

“We do not believe the root of the challenges has been fully diagnosed and see the company as being in a holding pattern as we await the arrival of incoming CEO Heidi O’Neill in September,” Stichter wrote.

Areas of uncertainty flagged by BTIG include the source of product underperformance, softer trends in China and international markets, and whether a planned 50-100 basis point increase in marketing spend will be sufficient to reverse traffic declines.

“We see potential for trends to deteriorate further before improving,” Stichter added. “While we acknowledge significant self-help opportunity and a relatively inexpensive valuation, we see reduced visibility into estimates and remain more comfortable on the sidelines.”

BNP Paribas Securities downgraded Lululemon from “Neutral” to “Underperform.” The firm’s price target on LULU was axed to $88 from $179. Analyst Laurent Vasilescu said the downgrade was due to concerns that the retailer continues to add double-digit square footage through openings despite negative comps. He also noted that recent product launches “are not working and Lulu needs a new design directive,” and China, its strongest growth market lately, is seeing a sharp deceleration in sales.

Vasilescu was also dismayed that Lululemon hired a “growth-oriented CEO,” Heidi O’Neill, rather than someone with turnaround experience. He wrote, “Now that the CEO transition path is set, fundamentals come back into view, and they are not good.”

Stifel cut its price target from $176 to $134 while keeping its “Hold” rating.

Peter McGoldrick, Stifel’s analyst, said the negative comps “pressure the high-fixed cost model,” and he now expects comps on a currency-neutral basis will remain negative through the first half of 2027 versus prior expectations of a third-quarter inflection. He wrote, “Absent an unforeseen improvement in domestic trends or change in investment strategy, we expect SG&A deleverage through FY27 and see earnings progress as flattish. Given uncertainty around the denominator, a discount valuation is warranted.”

Needham kept its “Hold” rating on LULU with no price target. Analyst Tom Nikic noted that, besides deteriorating comps in North America, international is becoming “more volatile” with slower growth rates in China and the “Rest of the World” segment. He further said Lululemon faces “multiple sources of margin pressure,” including tariffs, markdowns, and a planned increase in marketing spend. He wrote, “We remain sidelined on LULU shares following another challenging quarter and a sizable cut to the FY outlook. With a tough macro environment, an increasingly difficult competitive environment, and a new CEO who doesn’t even come aboard for another 2 months (and may choose to rebase numbers further), we think visibility remains too low to try calling a bottom.”

Bank of America lowered its price target on Lululemon to $140 from $175 and kept its rating at “Neutral.” In a note, Lorraine Hutchinson said the arrival of O’Neill as CEO in September could cause further strategic changes that may lead to another round of guidance reductions. She wrote, “We believe the risk/reward is balanced as near-term sales pressure in the US and margin headwinds from tariffs/de minimis are offset by growth opportunities internationally.”

Citi Research kept its “Neutral” rating at a $185 price target. Analyst Paul Lejuez wrote, “We believe mgmt.’s assumption that depressed sales trends continue through 2H26 is conservative, but we view higher markdowns as risk following recent product misses.”

Telsey Advisory Group slashed its price target on Lululemon to $122 from $175 and kept a “Market Perform” rating. Analyst Dana Telsey estimated that stabilization will be visible in three to four quarters.

Telsey wrote in a note, “The company continues to work to deliver a consistent flow of innovation, improve speed to market, and increase investment in marketing to enhance the brand narrative. However, with a sales decline of 4 percent in the US in Q1 and expectations for a LDD decrease in the US for Q2, visibility to progress on these initiatives is challenging at the moment. In addition, incoming CEO Heidi O’Neill may take some time to add her own perspective to the existing turnaround plan when she takes the helm in September while the global macro environment becomes increasingly uncertain.”

Among other investment firms reducing price targets on Lululemon, Piper Sandler reduced its price target from $130 to $110; Truist Financial, from $135 to $115; Wells Fargo, from $150 to $110; Jefferies, from $145 to $115; Bernstein, from $170 to $145; Barclays, from $161 to $113; Robert W. Baird, from $170 to $140.

Image courtesy Lululemon Shanghai iDA Workplace