Lululemon Athletica plummeted 15% in midday trading, headed for its worst day in more than a year after the company gave a weak outlook. About 10 analysts cut their price targets on the stock, sensing a tough year for the athletic-wear company in 2025.
While most kept their current ratings, Raymond James analyst Rick Patel downgraded Lululemon stock to market perform from outperform. Patel is no longer confident that Lululemon can return to positive comparable sales in 2025, according to a summary from TheFly.com.
Patel also cautioned that Lululemon's gross margin is under pressure from tariffs.
He and other analysts cited the same concerns, as well as U.S. consumers that seem to be cooling on shopping amid slower customer traffic.
"Beyond (fiscal 2025), we now have a more conservative sales and margin outlook, primarily driven by our view (Lululemon's) U.S. business is more mature than previously thought," UBS analyst Jay Sole wrote in note to clients. Management's U.S. sales outlook "indicates negative comps are very possible."
Morgan Stanley, which cut its price target to 373 from 411, warned U.S. and North American troubles are likely to linger the next 12 months, if not longer, per TheFly.com.
Tariffs, Forex Hurt Lululemon Stock
He also cited headwinds expected from new U.S. tariffs and unfavorable foreign exchange impacts for the Canada-based retailer. Sole cut the price target on Lululemon to 335 from 376 and maintained a neutral rating on Lululemon.
Lululemon forecast current-quarter sales of $2.335 billion to $2.355 billion, or an increase of 6% to 7%. Earnings per share were pegged at $2.53 to $2.58 vs. $2.54 in the year-ago quarter.
For the full fiscal year, management forecast revenue of $11.15 billion to $11.3 billion, or 5% to 7% growth, or 7% to 8% excluding the 53rd week of fiscal 2024. It forecast EPS of $14.95 to $15.15, vs. $14.48 in the previous year.
Analysts had expected a better outlook.
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While new product launches are having success, "the dynamic macro environment has contributed to a more cautious consumer" who is unsure of inflation and the economy, CEO Calvin McDonald said in the earnings call, according to a transcript via FactSet.
Executives told analysts that U.S. sales saw a negative traffic trend that's impacting the entire industry.
Lululemon Stock Worst In S&P 500
Lululemon reported January-quarter earnings of $6.14 a share, an increase of 16%. Sales climbed 13% to $3.611 billion. Both figures beat consensus analyst estimates.
The stock was the worst performer in the S&P 500 and the Nasdaq 100 as volume soared. Lululemon stock was among the 10 most heavily traded stocks in the Nasdaq 100 Friday morning, according to Dow Jones Market Data.
Lululemon shares gapped below the 200-day moving average, setting back a base the stock had been forming since the end of January.
The stock — which plummeted more than 55% from its peak in January 2023 to a low last August — climbed six straight months through January. It had been contracting since then. It is down 23.5% year to date.
Lululemon stock has a 21-day average true range (ATR) of 3.92%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR.
Stocks that tend to make more incremental moves have lower ATRs. In the current, unpredictable market, IBD suggests stocks with ATRs of 3% or below.
