By Teresa Rivas
Lululemon Athletica's one-year stock chart looks redder than the face of someone who's just been told they're wearing a pair of the yoga company's see-through leggings. Shareholders might not be in the black for some time.
This weekend brought another lowered price target from Citi analyst Paul Lejuez, who has a Neutral rating on the stock. He slightly increased his full-year earnings per share estimates for this fiscal year and next, but that is only to reflect a lower number of shares outstanding and a slightly lower-than-forecast tax rate.
"Despite the EPS forecast increase, we are lowering our target price from $210 to $185 based on higher capex and lower margins in F27E and beyond," he wrote.
That move capped off a number of lowered targets late last week, following the company's fourth-quarter report and the appointment of Chip Bergh, former president and CEO of Levi Strauss, to its board of directors on Wednesday.
No need to check your calendars, it's not 2013 -- when Lululemon was first in the hot seat for transparent leggings. Back then the athletic apparel maker was an up and coming star, having gained more than 300% since 2010.
Today things look quite different: The shares have lost some 50% in the past year, and have lost a similar amount over the last five-year period; they have lost two-thirds of their value from their late 2023 peak of $510.
The legging complaints in January were just the latest woe for Lululemon, which has been hit by rising competition, tariff worries, slowing demand, and management changes, and is now dealing with activist involvement, including from its founder. Even a strong holiday quarter wasn't enough to overshadow light full-year guidance.
Bargain-hunters may be tempted: The stock changes hands for just over 12 times next year's earnings, compared with its five-year average of nearly 34 times.
Yet it seems hasty to declare a bottom. Over the past six months the shares always bounced off low points around $160, but haven't found much momentum beyond that. Although fourth-quarter results were better than expected, the bar was low. Moreover, comparable sales in the U.S., its largest market, are still negative.
Much more likely is that the shares will continue to be range-bound until one of several things happen: The U.S. demonstrates sustainable same-store sales growth; there are meaningfully markdowns -- showing the company has its pricing power back -- and/or margin expansion; and the company has a permanent, capable CEO.
The latter is the biggest overhang for the stock at the moment, argues Jefferies' Randal Konik: "Until a credible CEO is in place to reset strategy, org design, and accountability (especially in NA) investors are left underwriting hope. With brand pressure widening and a margin reset still in motion...[there's] nothing to get excited about today."
The company has been searching for a CEO since January, when Calvin MacDonald, who had led the company since 2018, stepped down.
It's true that Lululemon still has a strong cash position and China bucked the trend to show strong growth. That nation, however, was just 16% of sales last year, and comps slowed overall for its other international markets.
Investors could buy the stock now, assuming that shares aren't far from their recent floor, and probably don't have that much more downside. Or they could wait for at least one or two "green shoots" to start to blossom.
The stock would have to gain some 60% just to get back to where it was in January 2025, which was already more than 15% where it started the previous year. So even Lululemon bulls who believe a turnaround is under way to recapture its former momentum would likely admit that it's worth giving up some small gains from here to stay on the sidelines until measurable progress has been made.
That proof is unlikely to come for two or three quarters. At least yoga teaches patience.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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March 23, 2026 15:23 ET (19:23 GMT)
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