Lululemon’s Stock (LULU) Underperforming, Analyst Expects It To Get Worse In Earnings Preview

Lululemon's stock price (NYSE:LULU) is fresh off hitting 52 week lows, with Friday's new mark of $191.44 coming on the back of a challenging year for bulls. Analysts are increasingly questioning the firm's strategy, anticipating weaker financial performance leading in to earnings.

LULU shares are currently trading at $195 in the pre-market for a 0.88% gain on the session, yet with the YTD decline standing at 48%, there are plenty of questions to answer. 

Jefferies is particularly bearish, noting Lululemon's expanded outlet presence at Woodbury Commons while arguing that such “outlet fire sales don't work, they only degrade brands.” This concern underscores a broader unease about Lululemon potentially sacrificing brand equity for short-term gains.

The firm expects Q2 results to “underwhelm,” foresees “another guidance cut,” and believes earnings “will crash later this year.” Jefferies maintains an Underperform rating with a $160 price target, advising investors to continue selling shares.

Adding to the pressure, Lululemon lowered its full-year earnings guidance on June 5, citing a “dynamic macroenvironment” characterized by economic uncertainty, inflationary pressures, and reduced consumer confidence leading to decreased store traffic in the Americas. The company announced plans for modest strategic price increases and cost-cutting measures to mitigate these challenges.

Increased tariffs, notably a 20% levy on Vietnamese imports (which constitute 40% of Lululemon’s sourcing), are also expected to pressure margins and profitability. Rising promotional activity further exacerbates the situation. Consensus estimates suggest that the Q2 results, expected in late August, will be soft, reflecting these various headwinds.

The forward price-to-earnings (P/E) ratio has dropped to around 15, indicating diminished growth expectations and heightened investor caution. The company's struggles to maintain customer retention amid heightened competition from more fashionable and affordable rivals are also weighing on sentiment, as analysts worry that the company's focus on expansion and new product offerings may not adequately address core issues such as customer attrition and declining store traffic.

Analysts at Jefferies and elsewhere anticipate further weakness in earnings, maintaining cautious to bearish outlooks for the remainder of 2025. The company's ability to navigate these challenges will be crucial in determining its future performance and investor confidence.