Lululemon Hits Brakes On New Collection: JPMorgan Lowers Estimates After Innovation Setback

Lululemon Athletica Inc. LULU is hitting the brakes on its latest innovation, the Breezethrough collection.

JPMorgan analyst Matthew R. Boss has slashed his 2024 earnings estimates and removed the stock from his Analyst Focus List. The company’s stock, currently priced at $272.06, faces a revised price target of $338.00 for December 2025, down from a previous $457.00.

Lululemon has pulled its Breezethrough collection from both online and in-store sales just weeks after its launch. The Breezethrough collection, aimed at hot, low-impact workouts, faced criticism over its design, with a 3.1-star rating from 112 reviews highlighting issues like unflattering seams and discomfort.

Lululemon’s Innovation ‘Pause’ Raises Concerns

Lululemon's Breezethrough collection, launched on July 9, is experiencing significant pushback.

According to Boss's fieldwork, "LULU has now paused sales on the recently launched Breezethrough collection" after receiving "guest feedback" that highlighted design flaws.

The collection, intended for hot, low-impact workouts, has been criticized for its "V" shaped back seam and "U" shaped front seam, which customers found unflattering.

Also Read: What’s Going On With Lululemon Stock?

‘Execution Concerns’

The Breezethrough line was expected to drive growth in Lululemon's women's leggings category through the second half of 2024.

However, the pause in sales "compounds recent in-stock/color palette ‘execution’ concerns," Boss notes.

The innovation was a key driver behind the company's revenue growth expectations for the latter part of the year. As a result, JPMorgan has lowered its 2H24 revenue growth estimate to 8%, below the street's forecast of 13%.

Op Margins Expected To Drop

The halted innovation has led to a revision in earnings projections. Boss now models a decrease in 2H24 U.S. revenue growth to flat year-over-year, with international growth expected to moderate. This adjustment contributes to a lowered full-year EPS forecast of $13.90, versus the street's $14.34.

The firm’s operating margins are anticipated to drop to 22.8%, reflecting a fixed cost deleverage.

While Lululemon's stock has seen strong performance, current challenges with product innovation and execution issues are weighing on its growth prospects. Investors should brace for volatility as the company adjusts its strategies.

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