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Jefferies has reduced its price target for Lululemon from $175 to $160 and maintained an Underperform rating. The company faces challenges in its global expansion, including competition from Alo Yoga, and a decline in return on invested capital. The outlook for LULU is clouded by potential headwinds in China and heightened markdowns in the US, leading Jefferies to anticipate a notable decline in earnings.

Lululemon Athletica (LULU) experienced a 2.38% drop in its stock price on July 24, 2025, closing at $218.69. This decline occurred despite a slight gain in the S&P 500 and a mixed performance in the broader market, with the Dow Jones Industrial Average losing 0.7% and the Nasdaq Composite gaining 0.18% [2]. The company's stock has been under pressure due to several headwinds, including competition from brands like Alo Yoga, a decline in return on invested capital, and challenges in its global expansion [1].

Jefferies has recently reduced its price target for Lululemon from $175 to $160 and maintained an Underperform rating. The investment bank cited concerns over potential headwinds in China and heightened markdowns in the US, leading to an anticipated decline in earnings for the company [3]. Additionally, the company is facing challenges in its U.S. business and the women’s category, driven by an inflationary environment and soft discretionary spending [1].

Lululemon's upcoming earnings report is expected to show an earnings per share (EPS) of $2.87, a decrease of 8.89% from the same period last year. Revenue is projected to reach $2.54 billion, a 7.01% increase year-over-year. For the full fiscal year, the consensus estimates predict earnings of $14.47 per share and revenue of $11.19 billion, reflecting changes of -1.16% and +5.64% respectively from the previous year [2].

The company's valuation metrics also indicate a premium relative to its peers. Lululemon's forward 12-month price-to-earnings (P/E) multiple of 14.88X is higher than the Zacks Textile – Apparel industry’s average of 11.35X, suggesting an expensive valuation. Its price-to-sales (P/S) ratio of 2.32X is also below the industry’s 1.6X, adding to investor expectations [1].

Investors are advised to closely monitor Lululemon's performance as the company navigates these challenges. The company's long-term growth strategy and international momentum remain strong, but near-term profitability is expected to be limited due to cost headwinds and cautious consumer behavior [1].

References:
[1] https://www.nasdaq.com/articles/lululemon-lulu-stock-sinks-market-gains-heres-why
[2] https://www.ainvest.com/news/lululemon-stock-drops-2-38-market-gains-ranked-4th-earnings-decline-2507/
[3] https://www.nasdaq.com/articles/lululemons-premium-valuation-shows-strength-time-buy-or-wait