Jefferies analysts lowered their price target on Lululemon Athletica Inc (NASDAQ:LULU) stock to $185 from $200, coinciding with the outgoing CEO Calvin McDonald's final day at the company.
Shares of Lululemon traded at about $174 on Friday, down almost 60% in the last 12 months.
The analysts maintained a ‘Hold’ rating, noting that the stock could remain range-bound through 2026.
“End of an era… stock in limbo as we await next CEO,” the analysts wrote, highlighting both the company’s accomplishments and the challenges it faces. While sales grew under the outgoing leadership, the analysts said the brand has weakened, and core customers have drifted away.
They added that the new CEO, once a permanent appointment has been made, will confront rising competition, shifting fashion trends, softer productivity, and a heavier cost base, with EPS and margin risks persisting.
Jefferies pointed to a series of structural issues that need to be addressed. “Company culture…once differentiated the brand, but leadership turnover raises execution concerns in a slowing market,” the analysts wrote.
Product missteps were also cited, including pausing a legging line after complaints of see-through material. “The brand has moved far away from its core athleisure roots, while disjointed color palettes have failed to resonate and often end up on markdown racks,” they wrote.
The report also highlighted challenges with pricing and inventory. Premium price points, such as $168 sweaters, are under pressure, prompting aggressive repricing, and inventory growth of roughly 21% outpaced sales growth in the recent quarter. “
EPS continues to weaken as margin and inventory pressures unwind prior peak profitability, and shares rose only ~40% during Calvin McDonald’s tenure compared with ~150% for the S&P 500,” the analysts wrote.
Other concerns included expensive real estate expansion, limited international growth outside China, and intensifying competition from brands like Alo and Vuori.
The analysts highlighted that a turnaround would require leadership capable of reinvigorating company culture and product strategy.
“The challenges inherited from the outgoing CEO are substantial…this is not a quick fix, by any means,” they wrote, pointing investors to Nike as a benchmark for turnaround potential.