Lululemon Stock Tanks on Yet Another Guidance Cut. ‘It’s Going to Get Worse,’ Says Analyst.

Yoga mats for sale at the Lululemon flagship store in Shanghai, China. (Qilai Shen/Bloomberg)

Lululemon Athletica just can’t turn it around. Second-quarter earnings topped the Street’s estimates, but the company was forced to cut full-year guidance for a second consecutive quarter, tanking the stock Friday morning.

“It’s going to get worse…much worse,” said Jefferies analyst Randal Konik.

Lululemon has been pressured by tariffs as well as weakness in its key U.S. market. The company cut its full-year guidance for the second time in three months late Thursday and now expects net revenue to range from $10.85 billion to $11 billion, down from previous guidance for $11.15 billion to $11.30 billion, and below consensus of $11.2 billion at the midpoint.

“The guide is not low enough,” Konik said, reiterating an Underperform rating on the shares with a $150 price target, citing rising competition, lower growth, and fading brand strength.

Lululemon stock plummeted 17% to $170.20 in early morning trading, on track for its lowest close since March of 2020, according to Dow Jones Market data. Shares have shed 55% this year.

The company also revised its earnings guidance lower to reflect both the slowdown in sales and bigger-than-expected tariff impacts. Earnings per share will now range from $12.77 to $12.97 for the year, compared with a prior forecast of $14.58 to $14.78. Analysts were forecasting earnings of $14.40 for the year.

The guidance includes an estimated reduction in gross profit of about $240 million related to changes in trade policy, including higher tariffs and the removal of the de minimis exemption, Lululemon said.

While some near-term headwinds had been expected, the scrapping of the de minimis tariff exception is a far bigger issue than anticipated and puts additional pressure on margins, noted Evercore’s Michael Binetti. The analyst downgraded the stock to In Line from Outperform and lowered the price target to $180 from $265.

Lululemon’s management team on Thursday said the company had often taken advantage of the exemption to send packages from its Canadian distribution centers to U.S. customers. Management said tariffs and de minimis changes would cause gross margins to decline about 2.2 percentage points this year—the de minimis removal represents 1.7 percentage points of that total.

Binetti wasn’t the only analyst souring on the stock after earnings. Lululemon’s mean rating on FactSet —derived from 34 analysts’ ratings—switched to Hold from Overweight on Friday, marking the first time since October 2011 that the stock’s average rating wasn’t Overweight. As of Friday, 62% of analysts rate Lululemon a Hold, compared with 44% at the end of July. The stock’s mean target price also fell to $227.98 from $293.10.

Lululemon’s second-quarter earnings of $3.10 a share came in ahead of the consensus estimates for $2.86 among analysts tracked by FactSet.

Revenue rose 7% year over year to $2.53 billion, narrowly missing analysts’ projections for $2.54 billion, according to FactSet. Same-store sales rose 1% year over year, well below Wall Street expectations for a 3.7% increase.

The lackluster performance stems from a 4% same-store sales decline in Lululemon’s Americas business—the company’s most important source of revenue. Demand in North America has been struggling for several quarters now, a result of both slowing trends in the broader athleisure industry and ongoing market share gains among Lululemon’s competitors.

“While we continued to see positive momentum overall in our international regions in the second quarter, we are disappointed with our U.S. business results and aspects of our product execution,” said CEO Calvin McDonald in a press release. “We have closely assessed the drivers of our underperformance and are continuing to take the necessary actions to strengthen our merchandise mix and accelerate our business.”

The company is working on introducing new styles more frequently, but most of those efforts won’t start panning out until next spring. That essentially means Lululemon may lose a year of earnings growth, wrote Sharon Zackfia, an analyst at William Blair. Zackfia also downgraded the stock on Friday to Market Perform from Outperform.

“Ultimately, this is now a 2026 show-me story when new product hits in the spring, and we see little in the way of catalysts in the interim,” Zackfia wrote.

Performance was better in other countries, with same-store sales rising 17% year over year in China and 12% in the rest of the world. That momentum, however, wasn’t enough to make up for the lost revenue in the U.S.

“Lululemon’s international franchise is saving the show, but the core U.S. business has lost its rhythm,” wrote David Bartosiak, stock strategist at Zacks Investment Research, in emailed comments to Barron’s. “Investors wanted a sun salutation, but what they got was more of a downward dog. Now it’s all about whether this brand can bend without breaking under tariff pressure and home-market weakness.”

Write to Sabrina Escobar at sabrina.escobar@barrons.com