Key Moments
- Lululemon Athletica (NASDAQ:LULU) shares declined 1.7% in premarket trading after Wells Fargo reduced its forecasts below consensus.
- Wells Fargo cut fiscal 2027 and 2028 estimates following industry checks that pointed to “deep-rooted” challenges at the company.
- The bank now projects fiscal 2028 comparable sales in North America at -5.5% and trimmed China comparable sales expectations for 2027 and 2028.
Wells Fargo Turns More Cautious on Lululemon
Investing.com — Shares of Lululemon Athletica (NASDAQ:LULU) fell 1.7% in premarket trading Thursday after Wells Fargo lowered its projections for the athletic apparel group to levels below market consensus, citing softness in both North America and China.
Wells Fargo analyst Ike Boruchow cut his fiscal 2027 and fiscal 2028 forecasts following discussions with industry specialists and former Lululemon employees. These conversations indicated that “deep-rooted” issues at the company could take longer to resolve and may require “additional revenue rationalization and investment.”
Boruchow said Lululemon faces a “long road ahead” before it can achieve “above industry growth” again, highlighting uncertainty over how to “make the brand cool again” and “how long it will take.”
China Outlook Weakened on Saturation and Missteps
On China, Boruchow pointed to an “increasingly saturated market” and a diminishing runway for expansion in Tier 1 cities. He also cited company missteps, including the Great Wall incident in June, as additional pressure on the business.
As a result, Wells Fargo cut its fiscal 2027 and fiscal 2028 comparable sales projections for China to 4.2% and 1.1%, respectively, from previous estimates of 6.4% and 3.0%.
| Region | Metric | Fiscal Year | Prior Estimate | New Estimate |
|---|---|---|---|---|
| China | Comparable sales | 2027 | 6.4% | 4.2% |
| China | Comparable sales | 2028 | 3.0% | 1.1% |
| North America | Comparable sales | 2028 | Flat | -5.5% |
North America Seen Facing Another Reset Year
In North America, Boruchow warned that “shrinking revenue and contracting margin” are likely to push out any meaningful rebound, with fiscal 2028 anticipated to be “another rebasing year.”
Wells Fargo lowered its fiscal 2028 North America comparable sales estimate to -5.5% from a prior expectation of flat performance.
Analyst Stance on Near-Term Prospects
Boruchow said he is “incrementally more cautious” on Lululemon’s near-term trajectory, based on the most recent round of industry checks that informed the revised forecasts.
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