Lululemon Athletica: William Blair downgrades Market Perform from Outperform.

Lululemon Athletica: William Blair downgrades Market Perform from Outperform.

Lululemon Athletica Inc. (NASDAQ: LULU) faced a significant downgrade from William Blair on September 2, 2025, as the research firm moved its rating from Outperform to Market Perform. The downgrade reflects concerns about the timing of U.S. sales recovery and potential tariff impacts, which have been exacerbated by the discontinuation of the de minimis provision. This provision had a greater-than-expected impact on the athletic apparel retailer, affecting its financial outlook.

William Blair projects that Lululemon will effectively lose a year of earnings, with its 2026 EPS estimate of $14.18 falling below the previous 2025 EPS estimate of $14.41. The firm observed the stock trading at an aftermarket enterprise value of just under 7 times its new 2026 estimate. The research firm indicated that U.S. sales trends have shown no improvement to date, with performance worsening throughout the July quarter and apparently continuing into August. Achieving projected numbers depends on improving domestic sales and maintaining 20%-plus growth in China.

Despite the challenges, Lululemon maintains impressive gross profit margins of 59.1% and operates with a moderate debt level. The company is characterized as a "2026 show-me story" that hinges on new product launches in spring, with few catalysts expected in the interim period.

In other recent news, Lululemon reported its financial results for the second quarter of fiscal year 2025. The company achieved an EPS of $3.10, surpassing analyst forecasts of $2.87. However, its revenue of $2.53 billion slightly missed expectations, which were set at $2.54 billion. Despite the earnings beat, the company is facing challenges in the domestic market, which have led to a reduction in its fiscal year 2025 guidance.

The downgrade by William Blair follows a series of analyst downgrades and price target reductions. Telsey Advisory Group also downgraded Lululemon from Outperform to Market Perform, significantly reducing its price target from $360.00 to $200.00. The stock has declined over 41% in the past six months, and twelve analysts have recently revised their earnings estimates downward. These developments highlight the ongoing challenges Lululemon is navigating in the current economic landscape.

Lululemon Athletica Inc. reported its financial results for the second quarter of fiscal year 2025, revealing an EPS of $3.10, surpassing analyst forecasts of $2.87. Despite this earnings beat, the company’s revenue of $2.53 billion slightly missed expectations of $2.54 billion. Following the earnings announcement, Lululemon’s stock experienced a significant drop in premarket trading, declining by 17.23% to $170.59.

The company continues to expand globally, with 14 new stores in Q2. Lululemon’s digital revenue reached $1 billion, accounting for 39% of total revenue. Despite the EPS beat, the stock dropped by 17.23% in premarket trading to $170.59, reflecting investor concerns over the revenue miss and broader market challenges.

Lululemon has provided full-year 2025 revenue guidance of $10.85 billion to $11 billion, indicating a growth range of 2-4%. The company also projected full-year EPS to be between $12.77 and $12.97. Looking ahead, Lululemon expects a decline in U.S. revenue by 1-2%, while anticipating significant growth in China and other international markets.

Investors and financial professionals should closely monitor Lululemon’s ability to navigate these challenges and the potential impact on its future performance.

References:
[1] https://www.investing.com/news/analyst-ratings/lululemon-stock-rating-downgraded-by-william-blair-on-sales-concerns-93CH-4226161
[2] https://www.investing.com/news/analyst-ratings/telsey-downgrades-lululemon-stock-rating-amid-product-challenges-93CH-4226440
[3] https://www.investing.com/news/transcripts/earnings-call-transcript-lululemon-athletica-q2-2025-beats-eps-forecast-stock-drops-93CH-4226090