Lululemon Athletica (NASDAQ:LULU) reached the peak with its third-quarter results, analysts at Jefferies said as they maintained their ‘Underperform’ rating on the stock.
While the athletic apparel retailer raised its full-year guidance on the back of better-than-expected 3Q results, its 4Q revenue and earnings guidance was below market consensus.
International growth is also moderating. After a 60% increase in the 1Q, international growth slowed to 52% in 2Q and 49% in the latest quarter.
Likewise, accessories also continue to slow, while growth in men’s sales continues to underperform women’s, the analysts added.
“As we stated a number of times, we’ve been wrong, as the belt bag fad lasted longer than we thought and the numbers in 2023 YTD have been great,” the analysts wrote.
“That being said, we have strong conviction in our views that competition is rising, the belt bag trend is fading, and the consumer is slowing, which means the greatness of LULU will see the laws of gravity ensue in 2024. With a market cap near $60B we think risk/reward is asymmetrical to the downside.”
With a slowing US consumer ahead and a very high bar of expectations, the analysts said they don’t see room for Lululemon’s shares to rise from current levels.
They have a price target of $250 for the stock, signaling a 46% decline from current levels.
The company’s shares were up 0.2% at $464.17 in early morning trade on Friday.
Contact the author at stephen.gunnion@proactiveinvestors.com