Gary Black Flags 3 Problems Still Plaguing Lululemon After 'Disastrous' 6-Month Stretch

• Black criticized the company's push into loose-fitting "off-the-body" apparel, arguing that the category is inconsistent with Lululemon's core brand identity.
• He compared the move to putting the Tesla brand on non-electric vehicles.
• Black also pushed back against management's suggestion that boardroom drama involving founder Chip Wilson weighed on first-quarter sales.

The Future Fund LLC Managing Partner, Gary Black, on Friday identified three red flags following Lululemon Athletica Inc.’s (LULU) post-earnings call on Thursday.

Black stated in a post on X that the issues he identified suggest Lululemon may still not be on the right path after a "disastrous six-month stretch" that included the departure of former CEO Calvin McDonald.

Lululemon shares were down more than 9% in Friday’s midday trade. LULU was among the top trending tickers on Stocktwits at the time of writing.

Black Identifies 3 Red Flags For LULU

Black criticized the company's push into loose-fitting "off-the-body" apparel, arguing that the category is inconsistent with Lululemon's core brand identity, which has traditionally centered on form-fitting athletic wear. He compared the move to putting the Tesla Inc. (TSLA) brand on non-electric vehicles.

He also pushed back against management's suggestion that boardroom drama involving founder Chip Wilson weighed on first-quarter (Q1) sales, questioning how a proxy battle could affect consumer demand. Lululemon reached an 18-month standstill agreement with Wilson last month.

Black's third concern centered on leadership, noting that incoming CEO Heidi O'Neill will not officially start until September, potentially leaving Lululemon with two more quarters of sluggish performance as competitors, including Vuori, Alo, and Skims, continue to gain market share.

Analysts Cut LULU Target After Weak Outlook

Wall Street analysts turned more cautious on Lululemon following the company's Q1 results and guidance for the second quarter (Q2).

Truist lowered its price target on Lululemon to $115 from $135 while maintaining a ‘Hold’ rating, citing a significantly more pressured outlook.

The firm said management pointed to weak consumer demand for newer products and negative commentary across media and social channels as key factors behind the company's recent struggles.

Telsey Advisory also reduced its price target to $122 from $175 while reiterating a ‘Market Perform’ rating. The firm said that while Lululemon’s Q1 results were largely in line with expectations, the outlook disappointed investors.

Telsey added that visibility into a turnaround remains limited, citing declining U.S. sales and expectations for another low-double-digit sales decline in the second quarter.

LULU Cuts FY26 Forecast

Lululemon trimmed its fiscal year 2026 forecast to an earnings per share (EPS) in the range of $10.95 to $11.15, down from its previous view of $12.1 to $12.3. The athleisure giant also lowered its revenue guidance to $11 billion to $11.15 billion, down from its previous forecast of $11.35 billion to $11.5 billion.

According to Koyfin data, Wall Street expected an EPS of $11.58 on revenue of $11.31 billion.

Lululemon reported EPS of $1.69 on revenue of $2.5 billion, compared to an estimated EPS of $1.67 on revenue of $2.47 billion.

How Did Retail Investors React To LULU Stock?

Retail sentiment on Stocktwits around Lululemon trended in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing.

LULU stock is down 45% year-to-date and 66% over the past 12 months. The S&P 500 ETF (SPY) is up 25% over the past 12 months, while the Vanguard Mid-Cap Index Fund ETF (VO) is up 16%.

The Vanguard Total Stock Market Index Fund ETF (VTI) is up 26% during this period, while the Vanguard S&P 500 ETF (VOO) is up 25%.

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