Raymond James on Lululemon Athletica Inc. (LULU): 'F1Q25 Preview: Channel Checks Are Mixed, Keeping Us on the Sidelines'

Raymond James analyst Rick Patel reiterated a Market Perform rating on Lululemon Athletica Inc. (NASDAQ: LULU).

The analyst comments "We maintain our Market Perform into 1Q25 earnings on June 5 as we don’t see significant upside to 1Q revenue (most critical factor), nor do we see FY25 guidance being revised materially higher given ongoing macro/tariff uncertainty. We lower estimates to reflect increased macro uncertainty since LULU reported 4Q on March 27. The stock is (13)% YTD but +16% over the last month = expectations have risen. P/E of 19x is below the 5-year average of >30x, but we don’t consider risk/reward particularly compelling, considering near-term domestic revenue and margin pressure. Our 1Q channel checks (detailed below) are mixed, with unfavorable reads on store traffic (declines in 1Q and early 2QTD) but better reads on mobile app engagement. Google searches were consistent quarter-over-quarter for 1Q (2QTD consistent with 1Q). It isn’t clear to us that more innovation is driving a material uptick in traffic or conversion yet, and we believe this needs to work for LULU to drive consistent domestic growth, and to dispel the narrative that the U.S. is a source of downside risk. We model F1Q revenue +7.0% in line with consensus’s 7.2%. Our estimate reflects Americas +1.8% (Street +1.7%) and China +26.9% (Street +25.9%). We see international guidance as conservative, and LULU likely beats on strong momentum, but we don’t have high confidence on the Americas, which is the bigger focal point for investors. GM% guidance faces incremental pressure from current tariffs, but we don’t see significant risk as LULU already guided GM% lower (-60 bp for FY25, including 20 bp from China tariffs of 20%) and it has pricing power. SG&A is also planned to deleverage as LULU plays catch up with investments after pulling back last year. We view expense control as the source of EPS surprise, but we don’t have high conviction that an expense-driven EPS beat would re-rate the stock."

For an analyst ratings summary and ratings history on Lululemon Athletica Inc. click here. For more ratings news on Lululemon Athletica Inc. click here.

Shares of Lululemon Athletica Inc. closed at $322.95 yesterday.

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