BMO Capital issued an Underperform rating for Lululemon, citing weakening demand and margin pressure.

  • BMO Capital initiated coverage on Lululemon with a 70% price target, implying a 32% downside. 
  • BMO said new CEO Heidi O’Neill is taking over during a challenging period.
  • O’Neill said her turnaround plan will focus on stronger products, better execution and deeper customer connections. 

Lululemon Athletica Inc. (LULU) stock slipped overnight after BMO Capital launched coverage with an ‘Underperform’ rating, signaling 32% downside. The cautious view comes as new CEO Heidi O’Neill starts a turnaround focused on product innovation, stronger execution and rebuilding connections with increasingly cautious shoppers. 

Lululemon Athletica stock edged 0.3% lower overnight, ahead of Wednesday. The stock gained over 2% in regular session. 

BMO Flags Weakening Demand For Lululemon And Margin Pressure 

On Tuesday, BMO Capital began coverage of Lululemon with an ‘Underperform’ rating and a $70 price target, citing weakening consumer demand in both North America and China and growing pressure on the company's historically strong profit. The price target implied a 32% downside to the stock’s last closing price. 

BMO said CEO Heidi O'Neill is stepping into the top job at a difficult moment for the Canadian apparel company. The former Nike executive takes over with Lululemon needing to rebuild product momentum, reconnect with shoppers and restore confidence in its growth strategy.

Lululemon's second-quarter (Q2) results underscore the challenge. Q2 revenue fell about 4% year over year to $2.42 billion, while sales in the Americas declined 8%. Revenue in China also slipped, highlighting that weakness is no longer limited to one major market. 

Heidi O’Neill Takes Helm At Lululemon 

Lululemon CEO Heidi O’Neill began her first day in the top job by emphasizing product innovation, stronger execution and a renewed connection with customers.

“As I look ahead, I truly believe that we have an incredible opportunity in front of us: to re-establish who we are at our core and, from that foundation, take lululemon into its next chapter. That starts with product. Product that is innovative and distinctive, and that gives our guests a reason to choose us, love us, and root for us — again. It also means strengthening how we operate and how we connect with our guests and communities.”

Lululemon’s stock has fallen more than 50% this year as sales in North America weakened. Changing customer tastes, tougher competition and product issues hurt store traffic. The decline worsened after weak Q2 results and repeated cuts to the company’s full-year outlook. 

“The challenges we face did not emerge overnight, and they will not be fixed overnight — but I am confident they can be fixed, said O’Neill.

LULU Stock: Retail View 

On Stocktwits, retail sentiment around the stock remained in ‘extremely bullish’ territory. 

A user hoped for a ‘V-shaped’ recovery. 

LULU stock has crashed 37% in the last twelve months. 

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