Truist cuts Lululemon to sell, sees structural headwinds and nearly 20% downside

Investing.com -- Truist Securities downgraded Lululemon Athletica to Sell from Hold and slashed its price target to $94 from $115, warning that the athletic apparel retailer faces mounting structural challenges that could weigh on earnings and delay any meaningful recovery.

The brokerage said near- and medium-term risks remain skewed to the downside, citing weakening card spending trends, deteriorating brand momentum across social media, rising competition, and uncertainty surrounding the company's leadership transition. Truist argued investors may be underestimating the extent of the challenges, noting the stock has recovered more than expected despite a soft first-quarter outlook and continued pressure in third-party data.

Truist reduced its fiscal 2026 and 2027 earnings per share estimates to $10.50 and $10.25, respectively, from $11.25 and $11.75, both below Wall Street consensus. The firm also lowered its valuation multiple to 9x from 10x, saying there is limited visibility into when earnings may bottom as incoming CEO Heidi O'Neill is likely to prioritize investments and a "shrink-to-grow" strategy to stabilize the business.

The analysts pointed to weakening consumer engagement, including softer Google Trends and TikTok data, declining card spending, and Reddit discussions suggesting brand perception has deteriorated. They also highlighted competitive threats from newer activewear brands, concerns over increased markdowns, and slowing momentum in China following recent public relations controversies and intensifying competition.

Beyond company-specific issues, Truist said the removal of the U.S. de minimis exemption for certain cross-border shipments creates an additional structural headwind for profitability. The firm warned that retail turnarounds often take longer and prove more painful than investors expect, drawing parallels with Nike, VF Corp and Under Armour.

Despite the downgrade, Truist said upside risks include an easing of tariff-related pressures, stronger-than-expected consumer demand, or successful new product launches that improve sales momentum.

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