By Bill Peters
Analysts cite ‘increasing concerns about discounting’ and products ‘outside the scope of what Lululemon has excelled at’
Lululemon reports quarterly results on Sept. 4.
Over the past year, athleisure giant Lululemon Athletica has called out a slowdown in its women’s business following limited seasonal updates, limited brand awareness – including in the U.S. – cautious consumers and tariffs. It has launched new workout wear for women, looser fits and new leggings, while getting bolder with its marketing.
But as it prepares to report quarterly results next week, some Wall Street analysts say they still don’t have a clear sense of why its North American business has stumbled.
“There is frustration in the market due to the frequent changes in messaging on why the [North American] business has stalled, most recently due to the lack of scale on successful innovation,” BofA analyst Lorraine Hutchinson said in a note Tuesday.
She said she needed to see more data showing that Lululemon’s (LULU) newer products are working and can drive positive North American same-store sales trends in the second half of the year. Lululemon reports second-quarter results on Sept. 4.
Hutchinson also said that while Lululemon’s “premium brand positioning” and leeway to nudge prices higher might help it blunt the impact from the new U.S. tariff regime, there were “increasing concerns about discounting” – a sign of weaker demand. She said she would also be looking for signs of more stability in China and the rest of the world.
Still, she kept her buy rating on the stock, saying its extended drop so far this year offered investors a chance to snap up shares of a company with solid margins.
TD Cowen analyst John Kernan, in a note last week, said the company still needed to cut “non-differentiated logo product” and lower-quality basics, like T-shirts and sweatshirts. Competition with Alo Yoga and Vuori, he said, remained “robust.” Lululemon also faces competition over dupes.
The assortment in major city stores, Kernan said, lacked cohesion. He described shelves loaded with Lululemon Athletic Club outsized logo products, varsity jackets, T-shirts, sweatshirts, men’s mesh tank tops and bright satin shorts.
He said there were also signs of “less consistency” across men’s and women’s clothing – a potential consequence of changes in the company’s creative leadership, following last year’s departure of Chief Product Officer Sun Choe, leading Global Creative Director Jonathan Cheung to take on bigger design responsibilities.
Kernan also said that Lululemon’s capital expenses as a percentage of sales were high. Designs outside of Lululemon’s core products, he said, sometimes appeared “outside the scope of what Lululemon has excelled at.”
Lululemon’s stock is down around 47% so far this year, as of the close of trading on Tuesday.
-Bill Peters
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08-27-25 0715ET
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