Lululemon Athletica Inc. stock slipped 1.7% in pre-open trading after Truist Securities moved its coverage to Sell from Hold and reduced its price target to $94 from $115. Truist said the brand is under meaningful pressure and that it sees very limited visibility into any credible turnaround.
The downgrade represents one of the most bearish formal calls on the company in recent months and arrives amid a run of negative analyst activity following the company’s first-quarter earnings report issued in early June.
That first-quarter report delivered headline beats but exposed a number of operating weaknesses. Lululemon posted revenue of $2.47 billion and earnings per share of $1.69, narrowly topping consensus estimates. Beneath those figures, however, management disclosed a fifth consecutive quarter of declining comparable sales in the Americas, a notable contraction in gross margin, and a downgrade to its full-year outlook.
Management lowered full-year revenue guidance to a range of $11.0 billion to $11.15 billion and trimmed its earnings-per-share outlook by more than $1.00, actions that underscore the challenges the company is confronting in stabilizing top-line growth and profitability.
Truist highlighted the murkiness of any near-term recovery and pointed to the difficult task facing incoming CEO Heidi O’Neill, who is slated to assume leadership in September. The comment followed an earlier move by Morgan Stanley, which resumed coverage with an Underweight rating and set a $93 target on July 6.
Analyst sentiment on the stock has become notably skewed. Lululemon now has a single Buy rating on the street, compared with 30 Hold ratings and three Sell ratings, reflecting widespread caution among sell-side analysts.
The market backdrop offered limited relief. The NASDAQ declined 1.0% in today’s session, exerting pressure on growth-oriented and consumer discretionary names broadly, while the S&P 500 edged down 0.4%. A softer-than-expected June Producer Price Index reading provided some macro-level respite but did not counterbalance the company-specific headwinds for a stock that has already fallen well below its 52-week high of $233.75.
Taken together, the fresh Sell downgrade with a price target well below current trading levels, the deteriorating North American fundamentals detailed in the first-quarter report, and a weak tape for technology and growth stocks combined to push Lululemon shares lower in pre-market activity. Investors are now positioned near the lower end of the stock’s 52-week range as they look for clearer signs of operational improvement under new leadership.
Context for investors
- Truist cut its rating to Sell from Hold and reduced its price target to $94 from $115, citing limited visibility into a turnaround.
- First-quarter results showed $2.47 billion in revenue and $1.69 in EPS, but flagged a fifth consecutive quarterly decline in Americas comparable sales, a sharp gross margin contraction, and reduced full-year revenue guidance of $11.0–$11.15 billion with EPS guidance cut by more than $1.00.
- Market weakness broadly in growth and consumer discretionary segments - signaled by a 1.0% drop in the NASDAQ and a 0.4% dip in the S&P 500 - added to selling pressure.