Lululemon Athletica (LULU) Stock Forecast & Price Target

Lululemon Athletica reported strong financial performance, with total sales growing 7.1% to $2.566 billion, exceeding both consensus expectations and company guidance. Comparable sales in key regions, particularly in international markets, saw significant growth, with total international sales up 33% year-over-year, driven notably by a 46% year-over-year increase in mainland China. Moreover, the company has raised its full-year sales projections to between $10.962 billion and $11.047 billion, indicating positive momentum and confidence in sustained demand for its products.

Lululemon Athletica is facing significant downward pressure on its earnings per share (EPS) due to a higher-than-expected tax rate and a projected gross margin contraction of approximately 580 basis points year-over-year, influenced by increased tariffs and other operational costs. The company's operating margin has already declined by 350 basis points to 17.0%, with forecasts indicating further margin erosion of around 680 basis points in the upcoming quarter, largely attributed to ongoing tariff impacts and the removal of the de minimis exemption. Additionally, while inventory clean-up efforts are underway, the company's reliance on markdowns may hinder overall profitability amidst these challenging financial conditions.