On Friday, Needham, a financial analyst firm, adjusted its outlook on Lululemon Athletica Inc. (NASDAQ: NASDAQ:LULU), reducing the price target to $500 from the previous $525. Despite the change in the price target, Needham has maintained a Buy rating on the company's shares.
The adjustment follows Lululemon's fourth-quarter earnings, where the company surpassed expectations on both revenue and earnings per share. The positive results were attributed to a gross margin beat, fixed cost leverage, and a lower tax rate, which contributed an additional $0.14 to the earnings per share.
However, the current quarter-to-date has shown uneven demand in the United States, particularly within the women's segment. Lululemon's management has identified a lack of color choices and smaller sizes as factors contributing to the softer trends. They noted that while younger consumers continue to spend, older customers have become more cautious.
In response to the current demand dynamics, Lululemon is adapting its product assortment and investing in brand campaigns. The annual sales guidance accounts for some anticipated improvement in the Americas as new products are introduced.
Needham's commentary reflects a market divided in opinion on Lululemon's outlook. Some investors believe that the brand is facing growing competition, while others are confident that the company's challenges are addressable, given the strong response to new innovations.
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