These Analysts Cut Their Forecasts On Lululemon After Q1 Results

Lululemon reported Q1 revenue of $2.37 billion, slightly above estimates, while EPS of $2.60 was in line. Despite the revenue beat, the company's Q2 revenue guidance of $2.54-$2.56 billion is slightly below the $2.56 billion estimate, and Q2 EPS guidance of $2.85-$2.90 significantly lags the $3.31 consensus. Lululemon also lowered its full-year earnings forecast to $14.58-$14.78 per share, prompting analysts from Needham and Telsey Advisory Group to lower their price targets; LULU shares closed down 1.3%.

Analysis

Lululemon Athletica Inc. (LULU) reported first-quarter revenue of $2.37 billion, marginally exceeding the consensus estimate of $2.36 billion, while its earnings per share of $2.60 met analyst expectations. The CEO, Calvin McDonald, attributed this performance to growth across channels, categories, and markets, including the U.S., and positive guest response to product innovations. Despite this current performance, the company's forward guidance casts a shadow. Second-quarter revenue is guided to $2.54-$2.56 billion, versus estimates of $2.56 billion, but more critically, second-quarter EPS guidance of $2.85-$2.90 per share falls significantly short of the $3.31 consensus. Lululemon also revised its full-year 2025 earnings forecast downward to $14.58-$14.78 per share from a prior $14.95-$15.15, now below the anticipated $14.88 per share by analysts. This weaker earnings outlook, indicative of potential margin pressures or increased investments, contributed to a 1.3% decline in LULU shares and prompted analysts at Needham and Telsey Advisory Group to lower their price targets to $317 and $360 respectively, even while maintaining Buy and Outperform ratings. The overall sentiment is moderately negative, reflecting concerns primarily driven by the subdued profit outlook despite continued, albeit modest, revenue growth.

Key Decisions for Investors

• Investors should closely monitor Lululemon's execution against its Q2 guidance, particularly the significantly lowered EPS outlook, as a key indicator of margin trajectory.
• The reduction in full-year EPS guidance and subsequent price target cuts by analysts, despite maintained positive ratings, signal increased near-term uncertainty and warrant a cautious stance on new positions or a review of existing exposure.
• Focus on management's commentary in upcoming calls regarding the drivers for the lowered earnings forecast and strategies to mitigate these pressures, as this will be pivotal for reassessing the company's growth narrative and valuation.