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Investing.com - Truist Securities downgraded Lululemon Athletica Inc. (NASDAQ:LULU) from Buy to Hold on Friday, slashing its price target to $170.00 from $290.00 following disappointing second-quarter results. The stock currently trades at a P/E ratio of 11.7x, with impressive gross profit margins of 59.1%.
LULU shares plunged approximately 20% in pre-market trading after the athletic apparel retailer missed already-depressed investor expectations and significantly lowered its full-year outlook.
The downgrade reflects multiple headwinds facing the company, including weaker sales and the full impact of reciprocal tariffs, along with the removal of the de minimis exemption that previously allowed certain imports to avoid duties.
Truist also cited increased markdown pressure, which is now expected to be 50 basis points compared to the previously anticipated 15 basis points, further squeezing margins.
While the broker’s price target implies a price-to-earnings ratio of approximately 11.5x, which may provide some support, Truist identified ongoing risks from a stale product assortment, current tariff dynamics, macroeconomic pressure, category weakness, and growing competition for wallet share.
In other recent news, Lululemon Athletica Inc. reported second-quarter revenue of $2.53 billion, slightly missing analyst expectations of $2.54 billion. The company also issued weaker-than-expected guidance for the third quarter and full fiscal year 2026, projecting earnings per share of $2.18-$2.23 and revenue of $2.47-2.5 billion, below the consensus estimates. Despite these challenges, Truist Securities maintained a Buy rating on Lululemon with a $290.00 price target, even as the company adjusted its full-year guidance. Piper Sandler lowered its price target for Lululemon to $165.00, citing fatigue in the casual wear categories affecting higher-value consumers. Meanwhile, Bernstein reduced its price target to $220, pointing to a slowdown in the U.S. market and potential deceleration in China. Needham also adjusted its price target downward to $192.00, following Lululemon’s disappointing guidance cut, while still maintaining a Buy rating. These developments have sparked concerns in the athletic apparel market, impacting competitors like Nike.
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