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On Friday, Citi analysts adjusted their outlook on Lululemon Athletica Inc. (NASDAQ:LULU) by lowering the price target to $270 from the previous $325, while maintaining a Neutral rating. The adjustment comes in response to the company’s disappointing first-quarter performance, where total comparable sales increased by only 1%, falling short of the consensus expectation of a 4% rise. Despite the recent challenges, InvestingPro data shows Lululemon maintains impressive gross margins of 59.22% and a healthy current ratio of 2.16, indicating strong operational efficiency and financial stability.
The weaker-than-expected sales were primarily driven by underperformance in China and the rest of the world, with comparable sales in China increasing by 8%, compared to the anticipated 18%. The rest of the world saw a 7% increase, below the expected 15%. Meanwhile, sales in the Americas were in line with expectations but remained weak with a 1% decline. According to InvestingPro, the company’s overall revenue growth remains positive at 10.07% over the last twelve months, with 7 analysts recently revising their earnings expectations upward. Get access to 8 more exclusive InvestingPro Tips and comprehensive financial analysis through the Pro Research Report.
In its guidance for the second quarter, Lululemon’s sales projections align with consensus estimates. However, the company faces challenges from tariffs and investments impacting margins, resulting in earnings per share guidance below market expectations. Management has maintained its fiscal 2025 sales guidance, though first-quarter U.S. traffic trends and a significant deceleration in China and international sales raise concerns about future growth.
The company has introduced new products, but they have not yet led to increased customer traffic, posing challenges for returning to growth in the U.S. market. Additionally, inventory levels have risen by 23%, raising concerns about potential margin pressures. In pre-market trading, Lululemon shares were indicated to be down by 20%.
In other recent news, Lululemon Athletica Inc. reported its first-quarter results, achieving a 7% year-over-year increase in revenue and meeting its revenue targets. The company also maintained its annual forecast while projecting significant revenue growth in China for the second quarter. Despite these positive aspects, Lululemon reduced its full-year 2025 earnings per share (EPS) guidance, with concerns over tariff impacts and rising inventory levels. Analysts from Evercore ISI, KeyBanc, Jefferies, Piper Sandler, and Goldman Sachs adjusted their price targets for Lululemon, citing various challenges, including weak trends in the U.S. and slowing sales in China. Evercore ISI lowered the target to $320, maintaining an Outperform rating, while KeyBanc set their target at $350 with an Overweight rating. Jefferies expressed concerns over U.S. trends, reducing their target to $200 and maintaining an Underperform rating. Piper Sandler and Goldman Sachs also lowered their targets to $270 and $285, respectively, both maintaining Neutral ratings. Analysts remain cautious about Lululemon’s strategic initiatives and pricing adjustments amid competitive pressures and macroeconomic uncertainties.
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