Lululemon Faces Controversy in China Impacting Sales Outlook
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Source: seekingalpha
- Sales Outlook Downgrade: BNP Paribas analyst Laurent Vasilescu expects Lululemon's sales in China to suffer due to increased competition and the recent drum controversy, reiterating an Underperform rating and an $88 price target, indicating a 22% downside from Friday's closing price.
- Cultural Sensitivity Misstep: During a May 30 yoga event at the Great Wall, Lululemon used a Japanese taiko drum instead of a traditional Chinese dagu drum, a significant oversight that sparked widespread social media attention, leading to a delayed apology nearly a month later, highlighting a lack of awareness regarding historical sensitivities.
- Growth Rate Stagnation: Vasilescu projects flat topline growth in Mainland China by 2027, significantly below the consensus estimate of 11% growth, primarily due to competition from brands like ANTA, Xexymix, and new entrant Alo, with first-quarter comparable sales only increasing by 5%.
- Earnings Forecast Reduction: With the projection for Mainland China sales stalling, Vasilescu anticipates a 2% decline in overall FY27 topline, forecasting non-consensus EPS of $8, contrasting with consensus estimates of 3% revenue growth and $11.31 EPS for FY27.
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Analyst Views on LULU
Wall Street analysts forecast LULU stock price to rise
22 Analyst Rating
1 Buy
21 Hold
0 Sell
Hold
Current: 111.770
Low
146.00
Averages
207.12
High
303.00
Current: 111.770
Low
146.00
Averages
207.12
High
303.00
About LULU
lululemon athletica inc. is a technical athletic apparel, footwear, and accessories company. The Company organizes its operations into four regional markets: the Americas, China Mainland, Asia Pacific (APAC), and Europe and the Middle East (EMEA). It conducts its business through a number of different channels in each market, including the Company-operated stores, e-commerce, temporary locations, wholesale, outlets, a re-commerce program, and license and supply arrangements. The Company offers a comprehensive line of technical athletic apparel, footwear, and accessories marketed under the lululemon brand. Its apparel assortment includes items such as shorts, tops, and jackets designed for a healthy lifestyle, including athletic activities such as yoga, running, training, and most other activities. It also offers apparel designed for being on the move and fitness-inspired accessories. It operates stores in the United States, Canada, China Mainland, Australia, South Korea and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Grid Expansion Plans: The US Energy Information Administration reports that developers plan to add 24 gigawatts of utility-scale battery storage in 2026, ranking second only to solar, surpassing wind and natural gas, indicating the growing significance of storage in future power supply.
- Shift in Investor Focus: As electricity demand continues to rise, investors are increasingly recognizing power flexibility as part of AI infrastructure, with Ford's EDF battery storage deal exemplifying this trend, underscoring the strategic importance of energy storage.
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- High Call Option Activity: Notably, the $40 strike call option expiring June 26, 2026, has traded 22,468 contracts today, equating to about 2.2 million underlying shares, suggesting investor optimism regarding SMCI's future performance.
- Lululemon Options Activity: Concurrently, Lululemon athletica Inc (LULU) has recorded an options volume of 23,807 contracts today, representing approximately 2.4 million shares, which is 52.2% of its average daily trading volume over the past month, reflecting the brand's market activity.
- Focus on Call Options: The $100 strike call option for LULU, set to expire on July 17, 2026, has seen 1,208 contracts traded today, amounting to about 120,800 shares, indicating investor confidence in its future growth prospects.
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Lululemon Faces Controversy in China Impacting Sales Outlook
- Sales Outlook Downgrade: BNP Paribas analyst Laurent Vasilescu expects Lululemon's sales in China to suffer due to increased competition and the recent drum controversy, reiterating an Underperform rating and an $88 price target, indicating a 22% downside from Friday's closing price.
- Cultural Sensitivity Misstep: During a May 30 yoga event at the Great Wall, Lululemon used a Japanese taiko drum instead of a traditional Chinese dagu drum, a significant oversight that sparked widespread social media attention, leading to a delayed apology nearly a month later, highlighting a lack of awareness regarding historical sensitivities.
- Growth Rate Stagnation: Vasilescu projects flat topline growth in Mainland China by 2027, significantly below the consensus estimate of 11% growth, primarily due to competition from brands like ANTA, Xexymix, and new entrant Alo, with first-quarter comparable sales only increasing by 5%.
- Earnings Forecast Reduction: With the projection for Mainland China sales stalling, Vasilescu anticipates a 2% decline in overall FY27 topline, forecasting non-consensus EPS of $8, contrasting with consensus estimates of 3% revenue growth and $11.31 EPS for FY27.
See More
Lululemon Faces Reputation Crisis in China
- Reputation Crisis: Lululemon's yoga event at the Great Wall, which attracted over 2,000 participants, faced backlash on Chinese social media due to the use of a Japanese taiko drum, damaging the brand's image and consumer trust.
- Cultural Sensitivity Issues: While the company claimed the event aimed to honor Chinese culture, it admitted that the planning of the drum performance lacked thoughtful consideration, highlighting a deficiency in cultural sensitivity that could impact future market performance.
- Performance Decline: Lululemon's shares have fallen approximately 46% this year, primarily due to weaker North American performance leading to a lowered annual forecast, although China is still seen as a growth bright spot, albeit with potential slower growth ahead, raising investor concerns.
- Increased Competition: The brand faces intensified pressure from both Chinese and Western competitors, including Alo Yoga's market entry, while a recent yoga campaign in Shanghai drew criticism for inadequate rain gear and backup facilities, further affecting brand image and market share.
See More
Lululemon Faces Cultural Controversy in China
- Cultural Controversy Impact: A yoga event near the Great Wall of Beijing sparked backlash due to the inclusion of a Japanese taiko drum performance, prompting Lululemon to issue a public apology and acknowledge planning shortcomings, highlighting the brand's need for greater cultural sensitivity in the Chinese market.
- Sales Growth Concerns: While Lululemon's Q1 sales in China rose 30% year-on-year, the cultural controversy could damage consumer sentiment, complicating future expansion efforts in an increasingly competitive premium activewear market.
- Stock Price Pressure: Lululemon's stock has declined over 46% this year, facing additional pressure from rising U.S. interest rates that may further suppress consumer spending on high-priced apparel, increasing uncertainty about the company's future growth.
- Market Sentiment Shift: Retail sentiment around Lululemon remains in 'bearish' territory, with a 66% increase in message volume on social media over the past 24 hours, reflecting declining investor confidence in the brand's prospects in the Chinese market, which could impact stock performance.
See More
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- StubHub's Challenges and Opportunities: StubHub's revenue for FY 2025 was $1.7 billion, a 1.4% decline, resulting in a net loss of approximately $2.0 billion with a net margin of -109.2%, yet it showed a promising 12% revenue growth in Q1 2026, indicating signs of recovery.
- Supply Chain Risks: Lululemon's heavy reliance on suppliers in Vietnam and Taiwan exposes it to geopolitical risks, while StubHub faces regulatory scrutiny following a $10 million settlement with the FTC, which could impact the accuracy of future financial reporting.
- Market Valuation Comparison: While Lululemon appears to have a more favorable outlook based on future earnings estimates, StubHub's forward P/E ratio stands at 23.2x, reflecting market confidence in its growth potential despite recent net losses.
See More
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- Surge in Electricity Demand: According to Yahoo Finance's analysis, US data center electricity demand is projected to rise from 167 terawatt-hours in 2023 to 376 TWh by 2030, a growth sufficient to power 20 million average US homes for a year, highlighting the increasing reliance of AI infrastructure on electricity.
- Importance of Storage: Brett Conrad, chair of Fixx Energy, emphasizes that energy storage is a critical component for American manufacturing and AI data centers, acting as a buffer between energy producers and consumers to ensure stable power supply during peak demand, thereby enhancing overall system reliability.
- Grid Expansion Plans: The US Energy Information Administration reports that developers plan to add 24 gigawatts of utility-scale battery storage in 2026, ranking second only to solar, surpassing wind and natural gas, indicating the growing significance of storage in future power supply.
- Shift in Investor Focus: As electricity demand continues to rise, investors are increasingly recognizing power flexibility as part of AI infrastructure, with Ford's EDF battery storage deal exemplifying this trend, underscoring the strategic importance of energy storage.
See More
Super Micro and Lululemon Options Trading Active
- Super Micro Options Volume: Super Micro Computer Inc (SMCI) has seen an options volume of 368,929 contracts today, representing approximately 36.9 million shares, which is 52.7% of its average daily trading volume over the past month, indicating strong market interest in the stock.
- High Call Option Activity: Notably, the $40 strike call option expiring June 26, 2026, has traded 22,468 contracts today, equating to about 2.2 million underlying shares, suggesting investor optimism regarding SMCI's future performance.
- Lululemon Options Activity: Concurrently, Lululemon athletica Inc (LULU) has recorded an options volume of 23,807 contracts today, representing approximately 2.4 million shares, which is 52.2% of its average daily trading volume over the past month, reflecting the brand's market activity.
- Focus on Call Options: The $100 strike call option for LULU, set to expire on July 17, 2026, has seen 1,208 contracts traded today, amounting to about 120,800 shares, indicating investor confidence in its future growth prospects.
See More
Lululemon Faces Controversy in China Impacting Sales Outlook
- Sales Outlook Downgrade: BNP Paribas analyst Laurent Vasilescu expects Lululemon's sales in China to suffer due to increased competition and the recent drum controversy, reiterating an Underperform rating and an $88 price target, indicating a 22% downside from Friday's closing price.
- Cultural Sensitivity Misstep: During a May 30 yoga event at the Great Wall, Lululemon used a Japanese taiko drum instead of a traditional Chinese dagu drum, a significant oversight that sparked widespread social media attention, leading to a delayed apology nearly a month later, highlighting a lack of awareness regarding historical sensitivities.
- Growth Rate Stagnation: Vasilescu projects flat topline growth in Mainland China by 2027, significantly below the consensus estimate of 11% growth, primarily due to competition from brands like ANTA, Xexymix, and new entrant Alo, with first-quarter comparable sales only increasing by 5%.
- Earnings Forecast Reduction: With the projection for Mainland China sales stalling, Vasilescu anticipates a 2% decline in overall FY27 topline, forecasting non-consensus EPS of $8, contrasting with consensus estimates of 3% revenue growth and $11.31 EPS for FY27.
See More
Lululemon Faces Reputation Crisis in China
- Reputation Crisis: Lululemon's yoga event at the Great Wall, which attracted over 2,000 participants, faced backlash on Chinese social media due to the use of a Japanese taiko drum, damaging the brand's image and consumer trust.
- Cultural Sensitivity Issues: While the company claimed the event aimed to honor Chinese culture, it admitted that the planning of the drum performance lacked thoughtful consideration, highlighting a deficiency in cultural sensitivity that could impact future market performance.
- Performance Decline: Lululemon's shares have fallen approximately 46% this year, primarily due to weaker North American performance leading to a lowered annual forecast, although China is still seen as a growth bright spot, albeit with potential slower growth ahead, raising investor concerns.
- Increased Competition: The brand faces intensified pressure from both Chinese and Western competitors, including Alo Yoga's market entry, while a recent yoga campaign in Shanghai drew criticism for inadequate rain gear and backup facilities, further affecting brand image and market share.
See More
Lululemon Faces Cultural Controversy in China
- Cultural Controversy Impact: A yoga event near the Great Wall of Beijing sparked backlash due to the inclusion of a Japanese taiko drum performance, prompting Lululemon to issue a public apology and acknowledge planning shortcomings, highlighting the brand's need for greater cultural sensitivity in the Chinese market.
- Sales Growth Concerns: While Lululemon's Q1 sales in China rose 30% year-on-year, the cultural controversy could damage consumer sentiment, complicating future expansion efforts in an increasingly competitive premium activewear market.
- Stock Price Pressure: Lululemon's stock has declined over 46% this year, facing additional pressure from rising U.S. interest rates that may further suppress consumer spending on high-priced apparel, increasing uncertainty about the company's future growth.
- Market Sentiment Shift: Retail sentiment around Lululemon remains in 'bearish' territory, with a 66% increase in message volume on social media over the past 24 hours, reflecting declining investor confidence in the brand's prospects in the Chinese market, which could impact stock performance.
See More
Investment Outlook Comparison: Lululemon vs. StubHub
- Lululemon Financial Performance: In FY 2025, Lululemon reported revenue of $11.1 billion, a 4.9% increase year-over-year, but its net income fell to $1.6 billion with a net margin of 14.2%, indicating pressure from increased competition and leadership transitions.
- StubHub's Challenges and Opportunities: StubHub's revenue for FY 2025 was $1.7 billion, a 1.4% decline, resulting in a net loss of approximately $2.0 billion with a net margin of -109.2%, yet it showed a promising 12% revenue growth in Q1 2026, indicating signs of recovery.
- Supply Chain Risks: Lululemon's heavy reliance on suppliers in Vietnam and Taiwan exposes it to geopolitical risks, while StubHub faces regulatory scrutiny following a $10 million settlement with the FTC, which could impact the accuracy of future financial reporting.
- Market Valuation Comparison: While Lululemon appears to have a more favorable outlook based on future earnings estimates, StubHub's forward P/E ratio stands at 23.2x, reflecting market confidence in its growth potential despite recent net losses.
See More
