Wells Fargo Lowers Lululemon Forecast

Lululemon Athletica's stock fell 1.7% in premarket trading on Thursday after Wells Fargo downgraded the athleisure maker's financial outlook below market expectations.

According to Ike Boruchow, an analyst at the bank, the problems facing the company are deeper than previously thought, which means the recovery process will require more time and additional investments.

According to Wells Fargo's assessment, Lululemon has "a long way to go" to return to high growth rates in the industry. The analyst stated that the company's main challenge is restoring brand appeal and determining how long this process will take.

Regarding the Chinese market, the bank points to increasing competition and market saturation in Tier 1 cities. Additionally, the "Great Wall" incident that occurred at the company in June negatively impacted the brand's positioning. As a result, Wells Fargo lowered its forecast for China sales growth for fiscal years 2027 and 2028.

In North America, the analyst expects revenue declines and margin deterioration, which means, in his assessment, fiscal year 2028 will remain challenging for the company. Wells Fargo reduced its forecast for comparable sales in the region for 2028 from 0% to -5.5%.

According to the bank, recent industry research has further strengthened their caution regarding Lululemon's near-term prospects.