Lululemon Athletica (LULU) stock plunged nearly 10%, closing at $341.53 on March 20, even after posting better-than-expected Q4 2024 results. While earnings and revenue topped estimates, weak forward guidance, slowing growth, and rising inventory levels shook investor confidence. Wall Street remains cautious, with Jefferies analyst Randal Konik sticking to his Underperform rating.
Earnings Beat Overshadowed by Tepid Guidance
In the fourth quarter, Lululemon reported earnings per share of $6.14, beating the $5.85 analysts expected. Meanwhile, revenue rose 13% to $3.6 billion, aligning with forecasts.
Despite these strong numbers, the company’s guidance for fiscal 2025 fell short. It projected revenue growth of 5-7%, below the 7% Wall Street expected. The midpoint of EPS guidance was $15.05, missing the estimated $15.37. This cautious outlook sent shares tumbling in after-hours trading.
Flat Sales in Key Markets Raise Red Flags
One major concern is Lululemon’s stalled growth in the Americas. While international sales surged 26%, sales in the company’s core North American market remained flat year-over-year. This raises doubts about Lululemon’s ability to drive further growth, especially as competition heats up.
Meanwhile, growing inventory levels remain a key concern. An excess stock could force the company to offer deeper discounts, which may hurt profit margins.
Jefferies Stays Cautious on Lululemon’s Growth Outlook
After Lululemon’s Q4 results, Konik maintained an Underperform rating on the stock with a price target of $220, citing concerns about slowing growth and rising inventories.
Konik noted that while the fourth-quarter results were solid, the flat performance in the Americas and a muted outlook for fiscal 2025 suggest that sustaining growth in sales and EPS may be challenging.
Is LULU Stock a Buy?
The stock of Lululemon Athletica has a consensus Moderate Buy rating among 22 Wall Street analysts. That rating is based on 16 Buy, five Hold, and one Sell recommendations issued in the last three months. The average LULU price target of $420.68 implies 23.18% upside from current levels.
