Continued weakness across Lululemon Athletica’s (NASDAQ: LULU) two largest markets may force the athleisure giant into a second consecutive reduction of its full-year earnings guidance, according to UBS.
The Swiss bank expects Lululemon to cut its fiscal 2026 earnings forecast by approximately $1.25 per share, bringing the projected range down to $9.70 to $9.90.
The anticipated reduction would represent the second downward revision to Lululemon’s 2026 earnings outlook in less than a year, a troubling pattern for investors already on edge.
Lululemon initially projected fiscal 2026 earnings in the $12.10 to $12.30 per share range during the fourth quarter of fiscal 2025, signaling confidence that has since proven difficult to sustain.
That guidance was then lowered to $10.95 to $11.15 per share following the company’s first-quarter fiscal 2026 results, as pressure in key markets began to mount visibly.
LULU shares were down 4.2% at the time of the UBS warning, with the stock tracking a fifth monthly decline across six months and shedding more than 44% of its value in 2026.
During the first quarter, Lululemon’s U.S. revenue fell 4%, while revenue from its broader Americas business declined 3% and comparable sales dropped 5%, painting a difficult picture domestically.
Interim co-CEO and CFO Meghan Frank attributed part of the downturn to external headwinds, saying that negative media and social-media commentary hurt customer traffic and sales while some new product releases also performed below expectations.
UBS acknowledged that bearish sentiment is widespread but suggested it may already be priced in, noting it sees “limited near-term catalysts” while also saying the “already-bearish sentiment” may be reflected in the stock’s low valuation.
The bank lowered its price target on LULU to $120 from $124 and maintained a Neutral rating, signaling no strong conviction in a near-term recovery despite the stock’s sharp decline.
Not everyone is pessimistic about Lululemon’s prospects, however, with noted investor Michael Burry, known for his prescient bet against the U.S. housing market ahead of the 2008 financial crisis, recently calling the stock “screaming cheap.”
Burry had previously stated that investors were too pessimistic about the athletic apparel company, positioning himself as a contrarian voice amid the prevailing negativity surrounding the brand.
Retail sentiment around LULU on Stocktwits shifted from bullish to neutral in the 24 hours surrounding the UBS note, reflecting growing uncertainty among individual investors ahead of the company’s next earnings report.
One Stocktwits user suggested the stock hitting $75 to $80 was “very much possible,” a notably bearish projection given that LULU was trading around $118 at the time.
Lululemon is scheduled to report its second-quarter 2026 earnings on September 3, with investors and analysts closely watching for any updated guidance that could further reshape the company’s valuation trajectory.
