Bernstein Downgrades Lululemon as U.S. Sales Decline and Risky 2026 Strategy Looms

Bernstein has downgraded Lululemon Athletica (NASDAQ: LULU) from Outperform to Market-Perform, warning that the company’s growth outlook faces mounting challenges amid weakening U.S. sales and a high-stakes product overhaul planned for 2026. The brokerage firm highlighted that Lululemon’s U.S. business—the brand’s largest market—is showing signs of deterioration, despite a short-term boost from its American Express promotion.

According to Bernstein, same-store sales in the U.S. are projected to fall 3% to 4% in the second half of 2025, reflecting stronger competition and less compelling product assortments. In response, Lululemon is banking on what the firm calls a “new newness” strategy—an ambitious plan to introduce 35% completely new products by Spring 2026. This strategy, led by a new creative director, shifts the company toward higher-risk lifestyle categories rather than its traditional performance wear.

Bernstein cautioned that the initiative appears “later and riskier” than previous refreshes and lacks clear evidence that it will resonate with consumers. Although Lululemon’s sales in China remain strong, growing over 20%, the firm noted this is not enough to offset the ongoing weakness in the Americas, where overall growth is expected to decline this year.

As a result, Bernstein reduced its 2026 earnings forecast to $13.43 per share from $14.77 and lowered its price target to $190 per share, implying roughly 14% upside. The firm stated it would remain on the sidelines until there is proof that the new strategy can reignite demand and restore pricing power in the U.S.

Until then, Bernstein expects muted earnings growth as margins face pressure from markdowns and operational inefficiencies. The firm concluded, “Underlying U.S. trends are worsening, and growth hinges on an untested strategy still months away, leaving limited visibility into a product-led recovery.”