What Happened?
Shares of athletic apparel retailer Lululemon (NASDAQ: LULU) fell 2.9% in the afternoon session after Needham downgraded the stock to "Hold" from "Buy," citing a challenging competitive landscape and weakness in its U.S. business.
The downgrade followed a series of similar moves from other analysts. Needham noted that North American sales trends had worsened, with comparable sales declining in the first two quarters of 2025. The firm expressed concern that the competitive environment, with brands like Alo, Vuori, and Fabletics offering similar "athleisure" options, was stifling Lululemon's growth.
Additionally, the company was more impacted by tariffs on e-commerce orders than expected after the removal of a key import duty exemption. These factors led Needham to believe that Wall Street's profit forecasts for 2026 looked too high, and they warned of potential downside risk for the stock over the next year.
The shares closed the day at $172.06, down 4% from previous close.
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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 13 days ago when the stock dropped 3.4% on the news that 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.
Lululemon is down 53.8% since the beginning of the year, and at $171.92 per share, it is trading 59.2% 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 $545.17.
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