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Investing.com - Bernstein has reiterated an Outperform rating and $220.00 price target on Lululemon Athletica Inc. (NASDAQ:LULU) as the athletic apparel retailer plans significant product assortment changes for 2026. According to InvestingPro data, LULU appears undervalued, trading at an attractive PEG ratio of 0.84 despite its impressive gross margins of 59.1%.
The research firm notes that Lululemon’s 2025 product innovations have underperformed because they "weren’t new enough," with management determining that truly new styles performed well while color variations of existing products failed to generate excitement.
For spring 2026, Lululemon plans to substantially increase new styles from 23% to 35% of its total assortment, a move management believes will drive an inflection point in U.S. sales next year.
Bernstein cautions that margins could remain under pressure for another year, citing continued tariff costs and catch-up spending on incentives and other accruals that will be lower in fiscal year 2025.
These margin headwinds should eventually be offset by tariff-driven price increases implemented in June and September 2025, along with cost savings that should provide leverage once sales growth resumes.
In other recent news, Lululemon Athletica Inc. has been the subject of multiple analyst assessments following its latest earnings report. Morgan Stanley has lowered its price target for Lululemon to $185, citing unexpected declines in key performance indicators and a larger-than-expected reduction in fiscal year guidance. Similarly, BofA Securities also adjusted its price target down to $185, pointing to slower growth in China and improvements in tariff mitigation as reasons for the revision. Baird has downgraded Lululemon from Outperform to Neutral, reducing its price target to $195 due to concerns about growth and margin trajectories. Meanwhile, Jefferies maintained its Underperform rating, expressing concerns about the company’s growth prospects in China, especially given the challenges highlighted in Nike’s recent earnings call. On a more optimistic note, BTIG reiterated its Buy rating and maintained a $303 price target, citing potential for improvements in execution. These developments reflect a mixed outlook for Lululemon, with analysts divided on the company’s future growth prospects.
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