Lululemon Disappoints In Q4, Analysts Say Brand Is 'Strong But Overstretched'

Shares of Lululemon Athletica Inc ( LULU ) tanked almost 15% at last check on Friday despite the apparel company’s upbeat fourth-quarter report.

Here are some key analyst takeaways.

• BMO Capital Markets analyst Simeon Siegel reiterated a Market Perform rating, while reducing the price target from $313 to $302.
• KeyBanc Capital analyst Ashley Owens maintained an Overweight rating, while cutting the price target from $420 to $400.
• Goldman Sachs analyst Brooke Roach reaffirmed a Neutral rating, while slashing the price target from $397 to $363.
• Needham analyst Tom Nikic reiterated a Buy rating, while lowering the price target from $430 to $366.
• Telsey analyst Dana Telsey maintained an Outperform rating, while cutting the price target from $445 to $385.
• Bank of America analyst Lorraine Hutchinson reiterated a Buy rating, while reducing the price target from $480 to $400.

Check out other analyst stock ratings.

BMO Capital Markets: Lululemon's gross margins expanded by 100 basis points (bps) year-on-year and came in 70bps above market expectations, "driven by better product margin and lower markdowns," Siegel said.

Management guided to first-quarter revenues in-line with expectations, while guiding to disappointing earnings. "We continue to see LULU as a strong, but overstretched, brand and are worried about long-term domestic and women’s revenue sizing as the brand continues to work on stretching further," the analyst added.

KeyBanc Capital Markets: Lululemon reported revenues of $3.61 billion. That’s up 13% year-on-year and beating consensus of $3.57 billion. The company's gross margins expanded to 60.4%, driving earnings to $6.14 per share versus consensus of $5.84 per share, Owens said.

The analyst predicted that management would guide to full-year revenues of $11.15B—$11.3B. The company plans to continue investing in building brand awareness and open 40-45 new stores in 2025.

Goldman Sachs: Lululemon's margins outperformed forecasts by a wide margin, "largely driven by stronger top line delivery, disciplined expense management, and benefits from FX," Roach said. The company's earnings came in higher than its pre-announced range.

"Looking ahead, the company struck a constructive tone on its FY25 innovation pipeline, with newness planned across fabrications and franchises," the analyst wrote. Management guided to first-quarter earnings of $2.53-$2.58 per share, lower than consensus of $2.72 per share.

Needham: Lululemon Athletica ( LULU ) had raised its fourth-quarter guidance in January and still delivered a beat, but this was overshadowed by disappointing full-year guidance, Nikic said. The company's latest outlook looks conservative, he added.

Although customers are responding well to the newness in Lululemon Athletica ( LULU ) product line, this may not be enough to offset a "macro-related slowdown," the analyst stated. While the company has several upcoming innovations, it has "not been immune to the industry-wide slowdown in traffic due to heightened macroeconomic uncertainty.”

Telsey Advisory Group: Lululemon Athletica's ( LULU ) quarterly beat was driven by "strength across the board, as sales, gross margin, and expense deleverage were all better than expected," Telsey said. The company's sales grew 12.7% to $3.612 billion and gross margins expanded to 60.4%, "nicely exceeding the market expectation," she added.

"Encouragingly, the newness was back to historical levels in 1Q25, following the pullback in FY24 that weighed on results," the analyst wrote. However, the company is impacted by a slowdown in traffic due to macro concerns in the US, she further stated.

BofA Securities: Customers responding well to newness increases confidence in Lululemon Athletica ( LULU ) being able to accelerate sales growth in North America when traffic stabilizes, Hutchinson said. She added that the company has not embedded improving US trends in its full-year guidance, unlike its peers.

"If this consumer soft patch proves to be short-lived, we expect better product and activations to drive sales upside," she wrote.

Price Action: Shares of Lululemon had declined by 14.97% to $291.02 at the time of publication on Friday.

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