Lululemon's refresh clouded amid US weakness

Investing.com -- Bernstein downgraded Lululemon Athletica to Market-Perform from Outperform, warning that the company’s reliance on a bold but unproven product refresh in 2026 leaves little near-term visibility as U.S. sales continue to weaken.

The brokerage said underlying trends in the U.S., Lululemon’s largest market, are deteriorating despite a temporary lift from its American Express promotion.

Same-store sales in the region are guided to fall 3% to 4% in the second half of 2025, reflecting intensifying competition and uninspiring assortments.

Management’s answer is what Bernstein called a “new newness” strategy, a pivot to 35% completely new products in Spring 2026, led by a new creative director and skewed toward higher-risk lifestyle categories.

Bernstein said the strategy is later and riskier than earlier efforts, and lacks proof points that it will resonate with consumers.

While China sales remain resilient, growing at more than 20%, Bernstein noted this is insufficient to offset U.S. weakness, with Americas growth now guided to decline this year.

The firm cut its 2026 earnings forecast to $13.43 per share from $14.77 and lowered its valuation multiple, reducing its price target to $190, about 14% upside.

“We are moving to the sidelines until we see evidence that newness can reaccelerate traffic and pricing in the U.S.,” Bernstein wrote, citing low visibility into a product-led recovery.

Until then, it expects earnings growth to remain muted as margins are pressured by markdowns and operating deleverage.

“Underlying US trends are worsening and growth seems contingent on a newness strategy that is 6 months away and unproven… without clear proof points to back this strategy’s success, we are losing conviction in the bull thesis”

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