Lululemon Athletica’s (LULU) shares jumped 3.17% on Tuesday, followed by a modest 0.11% gain in after-hours trading, sparking fresh interest among investors. The surge comes after the athletic retailer filed a lawsuit against Costco (COST) earlier this week, accusing the wholesale giant of copying and selling its popular apparel designs at much lower prices. Investors seem to support the company’s strong stand to protect its brand.
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Overall, consumer stocks are on the rise, buoyed by strong Fourth of July sales that signal renewed retail optimism.
What Does This Lawsuit Mean for Lululemon?
The lawsuit is Lululemon’s biggest move yet against the growing trend of Gen Z-driven fashion dupes. Notably, dupes have gone mainstream, driven by TikTok trends and budget-conscious Gen Z shoppers. For many, wearing a convincing knockoff now holds nearly the same status as owning the original luxury item.
Additionally, the company alleges that Costco misleads some consumers into thinking its KIRKLAND-branded dupes are made by the same company that produces Lululemon’s original products.
The company is seeking full compensation for monetary damages and the significant harm to its brand and reputation. Lululemon also wants a jury trial and a court order to stop Costco from selling the copycat products.
Lululemon Faces Headwinds
LULU shares have fallen more than 35% year-to-date, reflecting mounting pressure from multiple headwinds. One key factor has been the impact of U.S. President Donald Trump’s import tariffs, which have disrupted the company’s supply chains and affected its manufacturing operations across Asia.
Lululemon’s financial performance has also softened in recent quarters, weighed down by slowing sales in China and a broader pullback in consumer spending. As a result, the company has lowered its full-year 2025 earnings per share (EPS) guidance to a range of $14.58 to $14.78, down from its previous outlook of $14.95 to $15.15.
Is LULU a Good Stock to Buy Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on LULU stock, based on 13 Buys, 11 Holds, and two Sells assigned in the last three months. The average Lululemon share price target is $299.81, which implies a potential upside of 22.31% from current levels.
