Needham has lowered its rating on Lululemon to “Hold” from “Buy” and removed its price target.
Needham & Co., an investment banking and asset management firm, became the second investment firm this week to downgrade Lululemon, citing dim prospects for the chain’s ability to revive its US business in the near term due to heightened competition in the athleisure sector.
The other downgrade came from Baird.
Needham lowered its rating on Lululemon to “Hold” from “Buy” and removed its price target. Previously, the price target was $192 per share.
On September 25, LULU shares closed at $172.01, down $7.21 (4.0%). Shares have declined by about 55 percent since the start of the year, when they were trading at $382.41.
In a note, Tom Nikic, an analyst at Needham, wrote, “It’s been a disappointing 18 months for LULU. While we were optimistic that new product initiatives would revive the US business in 2025, the competitive environment appears too challenging at the moment.”
Nikic also believes that analysts’ estimates are “too high,” as Needham expects a mid-single-digit EPS decline for Lululemon in FY26, whereas Wall Street’s consensus calls for a break-even performance.
Nikic added, “We see more downside risk to numbers over the next 6-to-12 months, even if fundamentals don’t deteriorate any further. “While we don’t think the company has done anything damaging to the brand, the operating environment is clearly very tough at the moment. We think it’s prudent to move to the sidelines until we see evidence that they can ‘right the ship’ domestically.”
