Last Update11 Oct 25Fair value Decreased 1.27%
Lululemon athletica’s analyst fair value target has been lowered to approximately $195.84 from $198.36. Analysts cite growing concerns over U.S. sales headwinds, increased competitive pressures, and a subdued earnings outlook, despite relatively stable profit margins.
Analyst Commentary
Recent Street research reveals a broad shift in tone among analysts regarding lululemon athletica's prospects, with the majority now expressing caution in their outlooks. Despite the range of views, several consistent themes have emerged in both bullish and bearish directions as analysts assess the company's valuation, growth trajectory, and execution capabilities.
Bullish Takeaways- Bullish analysts continue to highlight lululemon's industry-leading sales productivity and high margins, which remain well ahead of many peers and support relative valuation strength.
- Some analysts view the recent sharp decline in the stock’s valuation as creating a particularly attractive entry point, arguing that current prices are at historic lows relative to earnings multiples.
- There is hope that recent "clear the deck" actions, such as revised guidance and product resets, could position lululemon for improvement once macro headwinds and U.S. sales challenges begin to ease.
- A select group of analysts, while reducing estimates, still sees the company consistently outperforming the broader apparel sector if it can recapture brand momentum and navigate the tariff changes effectively.
- Bearish analysts warn of mounting downside risk to both sales and earnings, noting that consensus growth expectations for 2026 may be far too optimistic given the company’s declining U.S. performance and tougher competitive environment.
- Many point to heightened uncertainty around the timing and strength of a turnaround, with recent quarters showing decelerating North American sales and a lack of near-term catalysts.
- Analysts remain concerned about the impact of expired tariff exemptions and corrective measures, as well as a "stale" product assortment that may require significant time to refresh.
- Several research notes highlight that continued earnings revisions and margin pressures represent significant headwinds, challenging the ability to maintain premium valuation multiples in the near term.
What's in the News
- Citi has lowered its price target for Lululemon athletica to $220 from $270, maintaining a Neutral rating. The firm anticipates a small Q2 earnings beat accompanied by a guidance cut due to higher tariffs (Citi).
- Lululemon revised its full-year 2025 guidance and now expects net revenue of $10.850 billion to $11.000 billion, with diluted earnings per share between $12.77 and $12.97. The outlook reflects an estimated $240 million reduction in gross profit due to increased tariffs and the removal of the de minimis exemption.
- For Q3 2025, Lululemon projects net revenue between $2.470 billion and $2.500 billion, and diluted earnings per share in the range of $2.18 to $2.23, assuming a tax rate of approximately 30.5%.
- Between May and August 2025, Lululemon repurchased approximately 1.53 million shares for $349.05 million. This completes a buyback of over 7.5 million shares announced in December 2023.
- The company is set to open its first store in Italy in Milan's iconic shopping district on July 19, 2025. This marks continued international expansion with a 5,700-square-foot location featuring both men's and women's collections.
Valuation Changes
- Consensus Analyst Price Target: The fair value estimate has declined slightly from $198.36 to $195.84.
- Discount Rate: The discount rate has increased marginally from 8.06% to 8.14%.
- Revenue Growth: Expected annual revenue growth has edged down from 5.17% to 5.13%.
- Net Profit Margin: Projected net profit margin has increased marginally from 14.62% to 14.64%.
- Future P/E: The anticipated future price-to-earnings ratio has decreased slightly from 14.71x to 14.56x.
Key Takeaways
- Revamped product strategy and agile supply chain processes are set to drive revenue growth and boost conversion in core and international markets.
- Investments in digital, AI, and omnichannel initiatives aim to enhance customer experience and operational efficiency, supporting long-term demand and margin stability.
- Intensifying tariffs and competition, declining U.S. performance, maturing brand power, and shifting consumer trends threaten Lululemon's revenue growth, margins, and market leadership.
Catalysts
About lululemon athletica- Designs, distributes, and retails technical athletic apparel, footwear, and accessories for women and men under the lululemon brand in the United States, Canada, Mexico, China Mainland, Hong Kong, Taiwan, Macau, and internationally.
- The company is implementing a significant reset in its product approach, increasing the share of new styles in its assortment from 23% to 35% by Spring 2026, and investing in faster, more agile design and supply chain processes; these actions are expected to revitalize core categories, drive higher conversion, and support a reacceleration in U.S. and global revenue growth.
- International expansion remains a robust growth driver, with revenue in China up 25% and Rest of World up 19% this quarter; the company is early in international market penetration and is targeting continued double-digit store growth and entry into new markets, providing a multi-year runway for topline revenue and eventual margin expansion as scale increases.
- Ongoing investments in digital commerce, technology (including new AI initiatives), and omnichannel capabilities aim to enhance customer personalization and operational agility, which should better capture shifting consumer behaviors and support both revenue growth and margin efficiency.
- Strength in performance apparel and the company's ability to continue gaining market share in this higher-margin, innovation-driven segment aligns well with continued global adoption of health, wellness, and premium lifestyle trends, sustaining long-term demand, pricing power, and brand loyalty-positively impacting both revenue and net margins.
- Cost mitigation strategies in response to new tariffs and the removal of the de minimis exemption-including selective price increases, vendor negotiations, and supply chain optimization-are expected to lessen pressure on gross margins in 2026 and beyond, helping stabilize free cash flow and earnings despite near-term headwinds.
lululemon athletica Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming lululemon athletica's revenue will grow by 5.4% annually over the next 3 years.
- Analysts assume that profit margins will shrink from 16.4% today to 14.5% in 3 years time.
- Analysts expect earnings to reach $1.9 billion (and earnings per share of $16.71) by about September 2028, up from $1.8 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.2 billion in earnings, and the most bearish expecting $1.5 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.9x on those 2028 earnings, up from 11.0x today. This future PE is lower than the current PE for the US Luxury industry at 19.8x.
- Analysts expect the number of shares outstanding to decline by 3.41% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.05%, as per the Simply Wall St company report.
lululemon athletica Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Lululemon is facing significant pressures from increased tariffs and the removal of the de minimis provision, which are expected to reduce gross and operating margins by approximately 300–390 basis points in 2025 and have a $320 million mitigated annualized impact by 2026, limiting earnings growth unless mitigation strategies (pricing, vendor negotiations, expense actions) are highly successful.
- The U.S. business, representing a large portion of revenue, is experiencing a decline (1–2% for 2025) with underperforming core casual/lifestyle categories, decreased guest frequency and conversion, and growing fatigue in key product franchises, posing risks to long-term revenue and gross margin if category innovation does not rapidly succeed.
- Lululemon's brand is maturing in core markets, making it harder to command a premium and necessitating heavier reliance on newness and innovation; if efforts to reset product cycles and accelerate trend creation in casual/lifestyle fall short, the company could see further compression in gross margin due to higher markdowns and promotional activity.
- Heightened industry competition, with many new entrants and established brands now offering similar athleisure and performance apparel, is intensifying promotional pressures and could erode Lululemon's market share and pricing power, contributing to slower revenue growth and further margin compression.
- Macro headwinds, including increasing consumer selectivity, rising discretionary spending in experiences vs. goods, and slower apparel spending in both the U.S. and Tier 1 Chinese cities, suggest secular category growth could normalize or decelerate post-pandemic, risking long-term revenue growth and overall earnings expansion.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $206.168 for lululemon athletica based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $303.0, and the most bearish reporting a price target of just $100.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $12.8 billion, earnings will come to $1.9 billion, and it would be trading on a PE ratio of 14.9x, assuming you use a discount rate of 8.1%.
- Given the current share price of $165.69, the analyst price target of $206.17 is 19.6% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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US$225.76
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21.1% undervalued intrinsic discount10.00%
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