Guggenheim Partners significantly lowered its EPS estimates for Lululemon for fiscal years 2026 and 2027, citing ongoing concerns about the company's U.S. sales reset and mixed Q2 results. This downgrade, coupled with lower Q3 guidance and weaker underlying gross margins compared to peers, has led to a substantial drop in LULU's stock price.
Guggenheim Partners cut Lululemon's fiscal 2026 and 2027 EPS estimates by a significant margin, from $10.16 to $8.90 and $9.45 to $7.96, respectively. This downgrade stems from Lululemon's mixed Q2 financial results, including sales misses in North America and China, and a lowered fiscal year 2026 guidance. The analyst views the Q3 sales guidance as the beginning of a domestic revenue reset, not the end, indicating potential prolonged challenges. While gross margin beat expectations due to a tariff refund, the underlying performance was weaker than peers. This news is highly negative for Lululemon, as it signals a more challenging growth trajectory and has already led to a substantial short-term stock price decline. Traders should be aware of the potential for continued volatility and downward pressure as the company navigates its sales reset.