Lululemon：产品问题还是品牌问题？

Aneesha Sherman+1 917 344 8457aneesha.sherman@bernsteinsg.com Jessica Tian+1 917 344 8413jessica.tian@bernsteinsg.com RatingMarket-Perform Jed Hodulik+1 917 344 8594jed.hodulik@bernsteinsg.com Price Target LULU 145.00 USD(170.00OLD) Lululemon: Product issue or brand issue? After a pretty sizable guide-down for FY26, driven by unsuccessful new launches, elevatedmarkdowns, and negative social media commentary, the question is: is this a product issue(meaning, gradually fixable over the next year) or a brand issue (which could weigh down salesand valuation for years to come)? Product has been a challenge for the past year, and will remain a drag through year-end. As new product launches have been underwhelming, Mgmt now expects US full-pricesales to turn barely positive by year-end, while markdowns remain elevated to discard olderproduct. Even under new mgmt (new CEO in Sept) and new design leadership, a 15-16month product dev cycle means at least H2 FY27 before the product engine can be properlyturned around. But is it bigger than product: a brand issue? We are already seeingLULU’s strong brandequity starting to diminish globally, in terms of consumer perceptions around Fashion andPerformance. A prolonged period of high markdowns, together with repeated concernsaround quality and materials, could further erode LULU’s brand equity, which will be harder(and slower) to fix. We may see a further reset in numbers for FY27. With the new CEO joining in September,FY26 will be more than halfway done, but we may see a kitchen-sinking of FY27 numbersif there is a hard reset in product, store base, or org structure. We lower our target multipleto 11x FY27 EPS to account for the risk of further cuts but, still, given where the stock istrading, it’s hard to see further downside at this point. Investment Implications We lower our Lululemon PT from $170 to $145, with a lower multiple (11x vs. 12x) on FY27EPS of $13.17 ($14.03 prior). Market-Perform. DETAILS Other related work: Global Sportswear: Is the sector de-rating deserved? A deep-dive into valuation over the next decadeThe Long View: Global Sportswear - Evolution of the sector over the next decadeLululemon: Heidi O'Neill named as next CEOLululemon: In the thick of itUS Apparel & Specialty Retail: What's in our shopping basket for 2026?Lululemon: The new newness - Downgrade to Market-Perform KEY TAKEAWAYS FROM THE Q1 PRINT Q1 sales grew 2% cc (vs. 1-3% guide),though comp sales declined by 2% cc. By region, Americas sales were -4% cc (with-6% cc comp); China grew 23% cc (with 13% cc comp); and RoW grew 9% cc (with 1% cc comp). Full-price sales sequentiallyimproved vs. Q4. February and March trends were stronger, but slowed down in late April and into May, driven by negative pressaround an investigation into potential use of PFAS in their activewear (which had been phased out in 2023). Margins missed slightly, driven entirely by GM.Gross margin declined 410 bps YoY to 54.2% (vs. 54.5% guide and 54.6%Street), driven by higher tariffs, higher markdowns (incl. credit card affiliate programs and higher inventory provisions), andhigher fixed costs, partially offset by favorable FX, higher pricing, and lower product costs. SG&A was 43% of sales (vs. 43.1%guide and 43.3% Street), which reflects 310 bps of deleverage, driven by increased employee costs, brand activations, andcosts related to the proxy contest, partially offset by ongoing initiatives to prudently manage costs across the company. Overall,EBIT margin came in at 11.2% (-730 bps YoY vs. guide of -710 bps). EPS came in at $1.69 (vs. $1.63-1.68 guide and $1.69 Street). Guidance (Exhibit 10-Exhibit 13) FY26 guide lowered substantially, despite a decent Q1 print.Revenue now guided for -1% to flat (vs. +2-4% prior), withN.Am declining HSD% (-LSD% prior), China growing 20%, and RoW growing mid-teens. GM guide raised to 55.7% (vs. 55.4%prior), but operating margin guide lowered to 16.1% (vs. 17.4% prior) partially due to a 100 bps increase in Marketing spendYoY, but also more deleverage from the lower top line. Diluted EPS is now expected to be $10.95-11.15 (vs. $12.10-12.30prior), excluding future buybacks. Assuming a similar level of buybacks as FY25, the diluted EPS guide would be roughly ~$11.55 at the midpoint. Q2 guidance also came in below expectations. Q2 revenue was guided to $2.45-$2.475b (-5% vs. Street estimates) asMgmt noted that the sales trend has decelerated, driven by negative social media commentary (Exhibit 3-Exhibit 5), whichhave negatively impacted traffic, as well as certain disappointing product launches. Americas and China are most impacted,with Americas sales guided to down LDD% (vs. -4% cc in Q1) and China sales guided up mid-to-high teens (vs. +23% in Q1).GM is guided to -410 bps YoY to 54.5% (150 bps below Street expectations), due to higher tariff costs (50 bps net, 150 bpsgross), higher markdowns due to higher Spring/Summer clearance (50 bps), and ongoing investments in st