Lululemon loses another bull as Bernstein pulls Outperform rating

[Lululemon clothing store with people]
Robert Way/iStock Editorial via Getty Images

Lululemon athletica (NASDAQ:LULU [https://seekingalpha.com/symbol/LULU]) is banking on a new designer to deliver a bolder collection this spring to revitalize the brand…a strategy that Bernstein thinks is way too risky to justify an Outperform rating on the stock.

“With price markdowns and traffic trends worsening, and with no visibility or proof points [of the new collection] to support an inflection, we find it hard to have conviction in the bull thesis,” Bernstein’s Aneesha Sherman said in her note to clients.

The key debate on lululemon (NASDAQ:LULU [https://seekingalpha.com/symbol/LULU]) right now is around newness: how much is enough and why hasn’t it worked yet, Sherman asks. Management is again betting on another new slate of offerings for Spring 2026 with 35% new products from an unproven designer in its Lifestyle category, a segment that carries higher fashion and higher markdown risks.

These risks are exacerbated by lululemon’s (NASDAQ:LULU [https://seekingalpha.com/symbol/LULU]) existing challenges. The company’s biggest market continues to be its most challenged, Sherman says, as U.S. revenue growth has rapidly decelerated from strong double-digits to single-digits.

This deceleration has been driven by several factors, including increased competition in a fragmented category, and the company’s own issues with designing and merchandising, which drove negative sales in 2024-2025.

“At the start of the year, our view was that after a year of deceleration, the Americas business would bottom out after Q1 and then start to accelerate on top of softer compares in Q2-Q3. We were wrong,” says Sherman, as two quarters in and the company is still not showing the stabilization necessary in U.S. comparable sales.

Last year’s “newness strategy” with new colors and new sizes failed to generate the response the company hoped for. So, the “new newness strategy” is taking it up a notch with new styles. While it’s too early to tell if this will breathe life into lululemon (LULU [https://seekingalpha.com/symbol/LULU]), Bernstein’s Sherman considers the lack of visibility and proof points enough to move her to the sidelines on the stock.

For now, she expects earnings growth of low single-digit% with slowing top-line and compressed margins. And reflecting on the slowing trends, growth in the Americas will likely trend negatively through FY26.

Bernstein downgrades lululemon (LULU [https://seekingalpha.com/symbol/LULU]) to Market Perform from Outperform, and lowers the price target by 14% to $190.

Lululemon (LULU [https://seekingalpha.com/symbol/LULU]) shares are down against on Thursday, adding another 2.5% to its 57% year-to-date decline.

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