What Happened?
Shares of athletic apparel retailer Lululemon (NASDAQ:LULU) fell 4% in the afternoon session after BMO Capital Markets analyst Kelly Crago initiated coverage with an Underperform rating and a $70 price target. According to TipRanks, Crago flagged weakening demand in the Americas and China and pressure on Lululemon’s premium margins, and she is forecasting fiscal 2027 earnings well below Wall Street consensus. The $70 target implied roughly 32% downside from the prior close and sits below the broader Street range. The bearish start to coverage, alongside BMO’s cautious view of athletic apparel, raised concerns about demand durability and margin risk.
After the initial drop, the shares shed some of the losses and rose to $99.41, down 3.2% from the previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Lululemon? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Lululemon’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 17.7% on the news that the company reported a decline in second-quarter net revenue and slashed its full-year sales and profit guidance. According to the company's press release, Lululemon reported net revenue of $2.42 billion, down 4.3% year-over-year, alongside a 9% decline in total comparable sales. GAAP diluted earnings per share came in at $2.92, down from $3.10 last year. However, this profit figure included $134.5 million in International Emergency Economic Powers Act (IEEPA) tariff refunds, which artificially inflated the gross margin by 560 basis points and added $0.86 to diluted EPS, the company said in its supplemental financial disclosures. Excluding the non-recurring tariff benefit, underlying operating profits fell 13.4% to $453.7 million, with Americas comparable sales down 12%. Consequently, management lowered its full-year 2026 revenue guidance to between $10.35 billion and $10.50 billion and trimmed its full-year earnings forecast to a range of $9.48 to $9.73 per share, according to the release. To combat slowing customer traffic and soft product rollouts, Lululemon is also seeking to navigate negative brand sentiment and consumer pushback in China, according to Fast Company.
Lululemon is down 52.8% since the beginning of the year, and at $99.41 per share, it is trading 54% below its 52-week high of $215.88 from January 2026. Investors who bought $1,000 worth of Lululemon’s shares 5 years ago would now be looking at only $236.28.
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