Lululemon Athletica Inc (NASDAQ:LULU)'s first quarter results are unlikely to mark a turning point for the athletic apparel retailer, with Jefferies analysts warning that continued weakness in traffic, conversion and brand engagement is expected to weigh on performance, while a meaningful turnaround may not materialize until 2027.
The brokerage expects Q1 revenue to rise 0.8% year over year to approximately $2.3 billion, with comparable sales declining 1% as softer demand in North America offsets continued international growth.
Jefferies forecasts earnings per share of $1.62, below the consensus estimate of $1.68, citing pressure on both margins and operating expenses.
The firm expects gross margin to contract by roughly 400 basis points to 54.3% due to elevated markdowns, tariff exposure and input-cost inflation. Higher freight costs, larger store formats and declining productivity are also expected to contribute to SG&A deleverage.
While Lululemon recently reached a cooperation agreement with founder Chip Wilson, Jefferies views the development primarily as a governance positive rather than a catalyst for near-term business improvement. The firm's analysts wrote that incoming CEO Heidi O'Neill is not expected to begin until September, while new board members tied to the agreement will join only after the company's June annual meeting.
As a result, Jefferies does not expect significant changes to product, merchandising or brand strategy to become evident until at least spring 2027.
The brokerage also remains focused on store productivity, which it views as vulnerable to further declines. Although sales per square foot fell 9% in 2025, Jefferies noted the metric remained elevated at about $1,426, or roughly 3.5 times the mall average. The firm argued that weakening traffic trends and softer brand momentum suggest further normalization may be ahead.
Despite its cautious view on fundamentals, Jefferies acknowledged that Lululemon's valuation has become more attractive after the stock's decline. Shares are trading at roughly 10 times forward earnings, near historical lows, according to the firm. The stock traded at $132 on Monday afternoon, down 36% so far this year.
Still, Jefferies wrote that issues surrounding product assortment, brand positioning and competition remain unresolved and that investors may face additional estimate revisions before a sustained recovery emerges.
The firm lowered its 2026 and 2027 earnings estimates by 10% and 13%, respectively, while reducing its revenue forecasts by 3% and 7%.
Lululemon will report its Q1 earnings on June 4.