What Happened?
Shares of athletic apparel retailer Lululemon (NASDAQ: LULU) fell 3.4% in the afternoon session after several Wall Street analysts downgraded their ratings and lowered price targets on the stock, contributing to its slide to a 52-week low.
The negative sentiment from analysts follows concerns over the athletic apparel company's performance. KeyBanc Capital Markets downgraded Lululemon to Sector Weight from Overweight, highlighting weak growth in the U.S. Similarly, Truist Securities downgraded the stock to a Hold rating. Adding to the pressure, BofA Securities and Rothschild Redburn were among several firms that cut their price targets. Analysts cited a range of issues, including challenges in North America, slower growth in China, product issues, and headwinds from tariffs. The flurry of downbeat assessments underscores investor uncertainty about the company's ability to navigate its current challenges.
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What Is The Market Telling Us
Lululemon’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 18.4% on the news that the company cut its full-year revenue and profit guidance, signaling a weaker outlook ahead. The company lowered its annual revenue forecast to $10.93 billion at the midpoint and its earnings per share guidance to $12.87 at the midpoint, which missed analyst expectations. This disappointing forecast overshadowed its second-quarter results, where the company actually beat profit estimates with an EPS of $3.10. However, other signs of slowing momentum were evident. Revenue for the quarter grew 6.5% to $2.53 billion, narrowly missing expectations. More concerningly, same-store sales growth decelerated sharply to just 1% year-on-year, a significant drop from its historical performance. The company's operating margin also compressed, falling to 20.7% from 22.8% in the same period last year, indicating reduced profitability.
Lululemon is down 57% since the beginning of the year, and at $160.17 per share, it is trading 62% below its 52-week high of $421.16 from January 2025. Investors who bought $1,000 worth of Lululemon’s shares 5 years ago would now be looking at an investment worth $510.39.
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