Wall Street questions Lululemon 2026 financial targets
A woman jogs past a Lululemon retail store.
Bloomberg | Getty Images
Lululemon is setting lofty goals for growth in the next five years and laying out for analysts exactly how it plans to get there. But not everyone on Wall Street is sold.
Lululemon shares shed 4.8% Wednesday after the leggings maker announced it’s aiming to double its annual revenue by 2026 to $12.5 billion. The stock was up about 1% in early trading Thursday. Within its five-year plan, the retailer expects its men’s business to double, its e-commerce sales to double, and its international revenue to quadruple from 2021 levels by 2026.
The company also announced the upcoming debut of a new membership model centered around fitness classes, which could serve as another potential revenue stream outside of its core apparel arm.
At least one analyst is concerned about potential hiccups in Lululemon’s ambitious blueprint given ongoing global supply chain disruption and inflationary pressures that are weighing on consumers. Following a recent ascent in the retailer’s shares, others believe investors could be coming away from Wednesday’s presentation a bit underwhelmed.
Hiccups
Jefferies analyst Randal Konik said in a note to clients Thursday that Lululemon’s plan “will require an added level of execution prowess,” as well as stability in the broader macroeconomic environment, that may be difficult to attain.
Konik has a “hold” rating on Lululemon shares and a price target of $375. The stock last traded closer to $385.
Konik also said Lululemon’s recent push into the footwear category could prove to be a poor idea, given all the competition already in the space, and that it could end up weighing on profit margins. (Executives said Wednesday that the launch, starting with women’s running shoes, has been off to a strong start, but didn’t offer specific sales numbers.)
While Konik applauded the company’s new membership offerings as a way to create more loyal customers, he reiterated his concerns around Mirror, the at-home fitness business that Lululemon acquired for $500 million back in 2020. Lululemon is folding the workout content on the Mirror platform into its $39-per-month membership plan.
“Our key concern is the slowing of unit sales as consumers return to gyms,” Konik said about Mirror. “We believe Lululemon will have difficulty expanding the installed base going forward.”
‘Scattershot’
Bernstein analyst Aneesha Sherman said she remains cautious, particularly around Lululemon’s ability to elevate gross margins, given the increasing role that international sales will play in the company’s broader strategy.
In the past, Lululemon has expanded overseas in a “scattershot” and pricey way, resulting in unprofitable growth, she wrote in a note to clients.
Lululemon aims to grow its international business so that by 2026, it will be the size that the North America business was in 2020, executives said. And should the men’s category double sales in the next five years as the company’s predicted, it…
Read More: Wall Street questions Lululemon 2026 financial targets