JP Morgan Downgrades Lululemon Athletica to Neutral, PT Cut to $191.

JP Morgan Downgrades Lululemon Athletica to Neutral, PT Cut to $191.

JP Morgan has downgraded Lululemon Athletica (LULU) to "Neutral" and lowered its price target (PT) to $191 from $224. The downgrade comes amidst a series of challenges facing the athleisure retailer, including weak guidance and a struggling U.S. business [3].

The company reported its second-quarter earnings on Thursday, revealing an earnings per share (EPS) of $3.10, which surpassed analyst forecasts of $2.87. However, revenue fell just short of expectations at $2.53 billion, leading to a significant drop in the stock's premarket trading, declining by 17.23% to $170.59 [4].

JP Morgan analyst Matthew Boss cited several factors contributing to the downgrade, including weak U.S. sales, margin pressures, and the removal of the de minimis exemption. The analyst noted that the company's second-quarter same-store-sales were weighed down by weak Americas comps, which sequentially worsened over the course of the quarter despite taking higher than planned markdowns [3].

The removal of the de minimis exemption is expected to knock around $240 million off annual profits, according to Lululemon's guidance. The company also cited elevated promotionality and incremental SG&A deleverage due to FX and ongoing investments in Power of 3x2 initiatives as contributing factors to the outlook downgrade [3].

Lululemon's stock has been under significant pressure, declining over 46% this year and losing nearly 19% of its value in the last 12 months. The company's shares were down nearly 19% before the bell on Friday after the sportswear maker cut its annual profit and sales forecast [1].

Retail sentiment on Lululemon has improved to "extremely bullish" from "bullish" territory, with message volumes at "extremely high" levels, according to data from Stocktwits. However, several analysts have downgraded the stock, with Stifel, Evercore ISI, Telsey Advisory, and Oppenheimer all lowering their price targets and ratings [1].

Lululemon's CEO Calvin McDonald acknowledged product missteps and a struggling U.S. business, stating that the firm has let its product life cycles run too long within many of its core categories. The company is taking steps to strengthen its merchandise mix and accelerate its business [1].

References:
[1] https://stocktwits.com/news-articles/markets/equity/lululemon-sees-multiple-wall-street-downgrades-amid-us-struggles/chwIa4xRdpw
[2] https://www.sharecast.com/news/international-companies/shares-plunge-as-lululemon-warns-on-profits--20839578.html
[3] https://www.zerohedge.com/markets/lululemon-plunges-weak-guidance-sexy-leggings-demand-falters
[4] https://www.investing.com/news/transcripts/earnings-call-transcript-lululemon-athletica-q2-2025-beats-eps-forecast-stock-drops-93CH-4226090