Lululemon (LULU) shares are down some 20% on Friday after the athletic apparel retailer reported slightly better-than-expected earnings for its Q1 but disappointed investors with its future outlook.

In the earnings release, the company’s chief executive, Calvin McDonald, blamed tariffs and fears of an economic slowdown for the weaker guide. 

Including today’s decline, Lululemon stock is down more than 35% versus its January high. 

Should You Buy the Dip in Lululemon Stock?

Speaking this morning with Yahoo Finance, senior Morningstar analyst David Swartz said LULU has pricing power and a fairly diversified supply chain that insulate it somewhat from tariff-related headwinds. 

However, Lululemon stock has bigger problems this year – problems that, if left unaddressed, may lead to continued pressure in the back half of 2025. 

These include growing signs of market saturation in North America. “LULU has stores in all major metropolitan regions in the US and Canada” – but sales growth in those key markets is beginning to stagnate,” he noted.  

Is the Post-Earnings Selloff in LULU Shares Overdone?

Lululemon has been focusing on China to offset the loss of momentum in North America this year – but the Morningstar analyst isn’t entirely content with that strategic pivot. 

Why? Because Beijing itself “is a troubled market right now,” Swartz argued, adding softness in sportswear companies’ regional performance in their latest reported quarters is indicative of weak consumer sentiment in the largest Asian economy. 

All in all, the investment firm doesn’t expect much from LULU shares unless management reignites growth in the Americas or taps successfully into a high-growth international market.  

That said, Morningstar currently has a $315 price target on Lululemon stock, indicating the post-earnings decline in the athleisure specialist may have gone a bit too far. 

How Wall Street Recommends Playing Lululemon in 2025

While Lululemon’s Q1 earnings may push Wall Street analysts into re-rating their estimates on the athleisure specialist, they had a consensus “Moderate Buy” rating on LULU shares heading into the quarterly print. 

According to Barchart, the mean target on Lululemon stock currently sits at about $353, suggesting potential upside of well over 30% from current levels.