TLDR
- Lululemon reports Q2 earnings Thursday after the bell
- Wall Street expects EPS of $1.80 and revenue of $2.46B, a decline of about 1.6% year-over-year
- LULU stock is down 42% year-to-date, trading around $118.07 with an average analyst price target of $127.35
- Goldman Sachs cut its price target to $111 from $122, rating the stock Neutral
- Credit card data, traffic indicators, and consumer sentiment all weakened during the quarter
Lululemon (LULU) is set to report second-quarter earnings this Thursday after the market close. Here is what analysts are watching.
Lululemon Athletica Inc., LULU
Wall Street expects EPS of $1.80 and revenue of $2.46B for the quarter. That would represent a year-over-year revenue decline of roughly 1.6%, a sharp reversal from the 6.5% growth LULU posted in the same period last year.
The stock is currently trading around $118.07, down nearly 42% so far this year. That compares poorly to the S&P 500, which is up about 11.5% over the same period.
The average analyst price target sits at $127.35, leaving some upside on paper. But sentiment heading into the print is cautious at best.
Goldman Sachs has a Neutral rating on the stock and recently cut its price target to $111 from $122. The firm pointed to weakening credit card sales, declining consumer sentiment, and softer traffic data during the quarter.
Goldman also flagged that net purchase intent and net promoter scores dropped further in July and remain well below peer averages. That is despite management pushing product and marketing initiatives.
Seeking Alpha’s Quant system rates LULU a Sell. Both Seeking Alpha analysts and Wall Street analysts broadly rate the stock a Hold.
One Seeking Alpha analyst noted that income and other financial metrics are declining, even as revenue growth holds in positive territory. International markets are picking up some of the slack, but Americas revenue is falling.
Guidance Already Set the Tone
Lululemon gave Q2 guidance back in Q1 results. The company projected revenue of $2.45B to $2.475B, reflecting a decline of 2% to 3% versus the prior year. EPS guidance came in at $1.76 to $1.81.
That guidance bracketed the consensus, which helps explain why analysts have not moved their estimates much. Over the last 30 days, estimates have largely held steady.
Lululemon has missed Wall Street’s revenue estimates multiple times over the past two years. EPS beats have been more consistent, with the company topping estimates 100% of the time over the last four quarters. Revenue beats came in at 75%.
Peers Give a Mixed Signal
A handful of apparel peers have already reported, offering some context. Abercrombie and Fitch posted 4.8% revenue growth, beating estimates by 1.8%, and the stock jumped 33.8% after results.
Gap reported a revenue decline of 2%, missing estimates by 0.9%, though the stock still rose 12.9%.
LULU has underperformed both peers over the last month, sliding 4.5% while the apparel group dropped an average of 3.5%.
Over the last three months, EPS and revenue estimates for LULU have seen zero upward revisions, compared with 21 downward revisions.
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