Lululemon's Americas business faces deep adjustments, its growth engine stalls, and it is downgraded to cautious rating (Morgan Stanley)

2026-07-23·ima-daily5min-0723-09-d84f35aab5

Street Signal | Lululemon's Americas business faces deep adjustments, its growth engine stalls, and it is downgraded to cautious rating (Morgan Stanley)

Through analysis, the report believes that its business scale in the Americas is significantly higher than its sustainable revenue base, and market consensus underestimates the risk of deep adjustment in the Americas business and overestimates the growth opportunities in the Chinese market.

Lululemon's revenue is forecast to grow in low single digits, with EPS of approximately US$10-11, which is lower than the market consensus of mid-single-digit growth and EPS expectations of US$12. The new management will most likely adopt a Shrink to Grow strategy.

The market is too optimistic about Lululemon's overseas expansion story and ignores the fact that the fundamentals of its core American market have deteriorated. One-sentence conclusion: Lululemon's growth myth is being shattered. Its core American market is facing serious adjustments. The Chinese market is difficult to fill the gap.

There is a risk of significant downward revision in market consensus expectations. The company may enter the painful stage of "shrinking in order to grow". Positive/negative: negative for Lululemon (LULU.US).

Market consensus has not yet fully reflected the risks of deep adjustments in the Americas business, and the earnings downward cycle may have just begun. Catalysts:

1) The upcoming quarterly financial report verifies the slowdown in business growth in the Americas;

2) Details of the "shrinking growth" strategy announced by the new management;

3) Whether the Chinese market growth data can meet market expectations.

Full text

Lululemon's Americas business faces deep adjustments, its growth engine stalls, and it is downgraded to cautious rating (Morgan Stanley)

Through analysis, the report believes that its business scale in the Americas is significantly higher than its sustainable revenue base, and market consensus underestimates the risk of deep adjustment in the Americas business and overestimates the growth opportunities in the Chinese market. Lululemon's revenue is forecast to grow in low single digits, with EPS of approximately US$10-11, which is lower than the market consensus of mid-single-digit growth and EPS expectations of US$12. The new management will most likely adopt a Shrink to Grow strategy. The market is too optimistic about Lululemon's overseas expansion story and ignores the fact that the fundamentals of its core American market have deteriorated. One-sentence conclusion: Lululemon's growth myth is being shattered. Its core American market is facing serious adjustments. The Chinese market is difficult to fill the gap. There is a risk of significant downward revision in market consensus expectations. The company may enter the painful stage of "shrinking in order to grow". Positive/negative: negative for Lululemon (LULU.US). Market consensus has not yet fully reflected the risks of deep adjustments in the Americas business, and the earnings downward cycle may have just begun. Catalysts: 1) The upcoming quarterly financial report verifies the slowdown in business growth in the Americas; 2) Details of the "shrinking growth" strategy announced by the new management; 3) Whether the Chinese market growth data can meet market expectations.