Lululemon (LULU) no longer showing growth as a stock to watch for investors

Lululemon (LULU) has a reputation for unparalleled growth and high-performing yoga pants, but recent trends suggest a different story. Following an optimistic build-up to its Q1 earnings report, the company saw disappointment. The stock plummeted by 20% post-earnings, settling at $259.04 on Monday. This sharp decline marked a noticeable departure from the optimistic $450 price targets some analysts had envisioned, according to analysis by Bob Lang.

Lang highlighted that while some analysts predicted a significant 53.9% increase in stock value, reality unfolded differently. Specifically, Lang expressed concerns that Lululemon’s attribution of its poor results and guidance to tariffs was unwarranted. He contrasted this approach with The Gap (GAP), Lululemon’s competitor via Athleta, which notably did not attribute its earnings challenges to tariffs. Instead, Lululemon heavily emphasized the impact of tariffs on its call, raising questions about the strategy’s validity in explaining performance.

With a considerable percentage of its products made in China and facing tariffs on several fronts, Lululemon hinted at slight price increases despite an already premium pricing strategy. While the previous quarter saw Lululemon meeting earnings expectations and maintaining its sales forecast for the year, the company revised its profit projections downwards. Now anticipating an EPS range of $14.58 to $14.78, a decrease from the initial $14.95 to $15.15 range, Lululemon faces some challenges amid a cautious U.S. consumer market.

Notably, the brand experienced a 2% decline in same-store sales in the Americas, signaling a shift from its prior premium valuation based on rapid growth promises. This decline has led to a substantial decrease in Lululemon’s stock value, with multiple analysts reducing their price targets, most notably J.P. Morgan’s slash from $389 to $303. Year-to-date, the stock has dropped by 32.3%, reflecting Wall Street’s altered perception of the brand’s future performance.

Discussions around Lululemon’s strategic focus have also emerged, with concerns regarding the company’s emphasis on new product launches and China expansion over addressing core customer needs. Analyst Randal Konik expressed apprehension about this strategic misalignment, highlighting a disconnect between customer base satisfaction and Lululemon’s current growth trajectory.

In essence, Lululemon’s status as an expensive growth stock faces scrutiny as signs of slowing growth emerge. Projections for minimal earnings decline in fiscal 2026 and modest growth in 2027 sharply contrast with the previous growth trajectory that attracted investors to the brand. As Lululemon grapples with challenging market conditions and shifting consumer demands, the stock’s future outlook remains uncertain, prompting investors to reconsider their expectations.