Bernstein downgrades Lululemon stock rating to Market Perform on delayed product strategy

Investing.com - Bernstein downgraded Lululemon Athletica Inc. (NASDAQ:LULU) from Outperform to Market Perform on Thursday, while lowering its price target to $190.00 from $220.00. The stock has already declined over 30% in the past six months, according to InvestingPro data, and is currently trading near its 52-week low.

The downgrade comes as the investment firm expresses concerns about Lululemon’s product renewal strategy, which has been pushed back to Spring 2026 and carries increased risk. Bernstein notes that while a recent American Express promotion has provided a short-term boost, underlying U.S. trends are deteriorating. Despite these concerns, InvestingPro data shows the company maintains impressive gross profit margins of 59.1% and a healthy current ratio of 2.27, indicating strong financial fundamentals.

The firm’s revised outlook hinges on Lululemon’s upcoming product strategy, which will introduce 35% completely new products, primarily in Lifestyle categories. Bernstein considers this approach riskier as it comes from "an unproven designer" and targets categories with higher fashion and markdown risk.

Bernstein specifically points to worsening metrics in price, markdowns, and store traffic, with no clear indicators supporting a potential turnaround in the near term. The firm had previously anticipated a U.S. product-driven recovery in 2025, but states this "hasn’t worked."

The investment firm has reduced its Americas revenue projections for Lululemon and plans to remain neutral on the stock until it sees "a clear uptick in ASP and/or traffic" indicating the new product strategy is resonating with consumers.

In other recent news, Lululemon Athletica Inc. has been the focus of several analyst reports. Morgan Stanley lowered its price target for Lululemon to $185.00, maintaining an Equalweight rating, due to unexpected performance issues in the second quarter and a larger-than-expected reduction in fiscal year guidance. Baird also downgraded Lululemon from Outperform to Neutral, adjusting its price target to $195.00, citing concerns about growth and margin trajectory. Jefferies reiterated its Underperform rating, with a $150.00 price target, due to concerns about the company’s growth prospects in China, referencing challenges highlighted in Nike’s recent earnings call. On a more positive note, BTIG maintained its Buy rating with a $303.00 price target, expressing optimism about potential improvements in execution, as they prepare for upcoming meetings with Lululemon’s executives. Similarly, Bernstein reiterated an Outperform rating with a $220.00 price target, noting plans for significant product changes in 2026 to address underperformance in recent innovations. These developments provide a varied outlook from analysts on Lululemon’s future performance.

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