Lululemon Stock Slides as Wells Fargo Slashes Estimates on North America, China Weakness

Lululemon Athletica (NASDAQ:LULU) shares declined in premarket trading Thursday after Wells Fargo reduced its financial estimates for the retailer to below-consensus levels, flagging significant headwinds in North America and China.

The stock fell 1.7% in premarket activity following the analyst note.

Analyst Cites 'Deep-Rooted' Problems

Wells Fargo analyst Ike Boruchow wrote that recent checks with industry experts and former employees suggest Lululemon faces "deep-rooted" problems that will require substantial time and investment to resolve. The analyst stated the company is on a "long road ahead" before it can achieve a return to "above industry growth."

Boruchow's note raises fundamental questions about the brand's trajectory, including how to "make the brand cool again" and how long a potential turnaround might take. The firm is now "incrementally more cautious" on the company's near-term prospects, according to the report.

Ad

Headwinds in Key Markets

Wells Fargo detailed specific concerns in Lululemon's two primary regions, leading to significant cuts in future sales projections.

• North America: The analyst pointed to "shrinking revenue and contracting margin," which are expected to delay any recovery. Wells Fargo now projects fiscal 2028 will be "another rebasing year" and slashed its North America comparable sales estimate for that year to -5.5% from a previous forecast of flat.
• China: The region is described as an "increasingly saturated market" with diminishing opportunities in Tier 1 cities. This is compounded by what the report called company missteps, such as the "Great Wall incident." Consequently, Wells Fargo lowered its comparable sales estimates for China to 4.2% for fiscal 2027 and 1.1% for fiscal 2028, down from prior estimates of 6.4% and 3.0%, respectively.