By Teresa Rivas
It's been easy to call a bottom in Lululemon Athletica in recent years--just keep waiting another day. That advice still holds.
The specialty athleticwear company, which had already dropped nearly 40% year to date alone before it reported fiscal first-quarter earnings after the bell Thursday, didn't reward bargain hunters. It might have seemed like a safe bet that all the bad news was baked in at that point, but it turns out to have not been. The shares were down more than 8% on Friday, and are on track for their lowest close since Christmas Eve 2018.
The quarter itself was better than expected, but the full-year outlook was the culprit: Lululemon said it will earn between $10.95 and $11.15 a share on revenue that will be flat or down 1%, translating into $11 billion to $11.15 billion. Analysts were looking for earnings per share of $12.27 on revenue of $11.47 billion.
At this point, the case for the stock can be summed up "in one line: It's too early," as Quo Vadis Capital President John Zolidis succinctly put it.
Lululemon is more optimistic. "We saw encouraging signs in the first quarter that reinforce we're moving in the right direction," said Interim Co-Chief Executive Officer & Chief Financial Officer Megan Frank on the earnings conference call, although she acknowledged "headwinds" that impacted the results. "In summary, we expect our actions to help rebuild momentum, expand share and reassert our leadership position."
Certainly there were problems in the quarter, including new product launches that didn't gain traction and negative social media buzz. And the forecast was far from inspiring, with analysts bracing for margin pressure and comparable sales declines.
It could get worse. By Guggenheim analyst Simeon Siegel's math, guidance only puts earnings per share down 0.3% for the second half of the year, putting it in danger for future cuts and "raising further concerns that last night's tonight's move is more 'thousand cuts,' than 'kitchen sink.'"
Investors may feel like they already endured a thousand cuts in recent years, given downbeat financial results and forecasts, see-through leggings scandals, worries that products contain toxic chemicals, and an ongoing conflict with the company's founder, who is trying to wrest control back from current management. Nor was Wall Street very enthusiastic about its new CEO, a former Nike alum, who was announced in April. It is hard to see what lifts the stock higher near-term from here.
"All told, EPS this year are expected to slide 16% to 17% on top of a 9% decline in 2025, and little in the way of catalysts is apparent given a new CEO start date in September that could very well position 2027 as another transition year," writes William Blair analyst Sharon Zackfia.
Transitions take time, and in the interim fashion, customer habits and loyalty change.
Lululemon is projecting full-price sales to be just positive by the end of the year, with plenty of discounting to clear underwhelming merchandise. That means even if the new CEO hits the ground running on Day 1 and does everything right, it will still be in the second half of 2027 that new, quality products will be on offer that can move the needle, Bernstein's Aneesha Sherman notes. At some point investors have to worry about the damage to the brand overall.
All of this means that even though the shares are trading for just over 10 times next year's expected earnings, so far there is little that could help it expand. The stock, down some 65% in the past five years, will likely need more than an upbeat quarter or two to convince investors the worst is really over. Other big retailers like Target and Dollar General have lost about half their value in the past five years too, demonstrating how tough the industry is even for seasoned players--and how long the slog back to the top can be.
At some point, Lululemon, but for now there's no telling when that will happen.
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.
(END) Dow Jones Newswires
June 05, 2026 13:50 ET (17:50 GMT)
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