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Investing.com - Goldman Sachs has lowered its price target on Lululemon Athletica Inc. (NASDAQ:LULU) to $200.00 from $232.00 while maintaining a Neutral rating on the athletic apparel retailer. The stock, currently trading at $206.09, has declined over 46% year-to-date, though InvestingPro analysis suggests the company is currently undervalued based on its proprietary Fair Value model.
The price target reduction follows Lululemon’s downward revision of its FY25 outlook across all key metrics, including lowered revenue growth expectations for the US, Canada, and China markets as consumer demand continues to soften. According to InvestingPro data, 12 analysts have recently revised their earnings expectations downward, though the company maintains strong fundamentals with an impressive 59.1% gross profit margin and a "GOOD" overall financial health score.
Goldman Sachs cited multiple margin pressures affecting the company, including incremental tariff rate increases (~50bps net headwind vs. 40bps prior), changes in the de minimis exemption (~170bps net headwind), elevated promotionality (~50bps headwind vs. 10-20bps prior), and incremental SG&A deleverage due to FX and ongoing investments (~80-90bps deleverage vs. ~50bps prior).
Lululemon management has indicated they expect a ~$320 million EBIT headwind from tariffs (including de minimis pressures) looking ahead to FY26, despite implementing strategic initiatives to boost US growth, such as accelerating product newness to approximately 35% of the assortment by Spring 2026 from the current ~23%.
The firm noted that Lululemon’s recent innovations and marketing strategies have not been sufficient to offset slowing comp momentum in key franchises, resulting in increased markdown pressure for the brand, with Goldman Sachs suggesting that stock outperformance will depend on Lululemon’s ability to deliver sequential acceleration in full-priced sales. The stock currently trades at a P/E ratio of 13.9, with analyst targets ranging from $150 to $500. For deeper insights into LULU’s valuation and growth prospects, including 10+ additional ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, Lululemon Athletica Inc. reported its financial results for the second quarter of fiscal year 2025, surpassing earnings per share (EPS) forecasts with a reported $3.10 against an expected $2.87. However, the company’s revenue of $2.53 billion fell slightly short of the anticipated $2.54 billion. Meanwhile, William Blair downgraded Lululemon from Outperform to Market Perform, citing concerns over U.S. sales recovery and tariff impacts, particularly due to the discontinuation of the de minimis provision. They also highlighted macroeconomic challenges in China, which could affect Lululemon’s fastest-growing market. Additionally, Stifel downgraded the stock from Buy to Hold, significantly reducing its price target from $324.00 to $205.00. This downgrade was attributed to domestic market pressures and the removal of the de minimis exemption, which resulted in a substantial cut to the company’s FY25 guidance. These developments reflect the complexities Lululemon is navigating in both domestic and international markets.
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