Lululemon Athletica’s (NASDAQ: LULU) share price has declined premarket Tuesday after the stock was downgraded by Bernstein analyst Aneesha Sherman.
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It represents the second negative note on the stock in two days after Jefferies reiterated an Underperform rating on Lululemon shares on Monday.
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Sherman cut Lululemon to Underperform from Market Perform, lowering the firm’s price target on the stock to $290 from $340 per share.
The analyst said in her research note that after Lululemon delivered 25% sales growth and 30% earnings growth for five straight years, it now “has a reset coming.”
In addition, Sherman says that with no more pent-up demand, a more cautious consumer outlook, and negative margin mix shifts, Lululemon’s earnings growth will decelerate “materially,” and Bernstein expects the stock’s multiple to follow.
On Monday, Jefferies analyst Randal Konik said in a note to clients that the firm’s latest store checks show the “flaws” in Lululemon’s merchandise strategy.
Konik states that the checks indicate Lululemon’s promotional activity remains elevated, and the firm believes there is increased category expansion risk with “heavy” markdowns in outerwear and light traffic in the footwear section of stores.
In addition, the analyst argues that the belt bag fad has peaked, and the company is adding new colours and larger logos to drum up demand.
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