BNP Paribas Maintains Underperform Rating on lululemon: China Market Controversies Compounded by Competitive Pressures
Taylor Wilson
BNP Paribas reiterates its underperform rating on lululemon with an $88 target price, implying ~22% downside; two China-market controversies plus intensifying local competition lead the analyst to forecast mainland China revenue growth falling to zero.
What exactly happened in China?
At a yoga event on the Great Wall, lululemon used a Japanese taiko drum instead of a traditional Chinese drum — a misstep that drew backlash given historical sensitivities. The company took nearly a month to issue an apology.
A separate controversy arose from remarks about forever chemicals — synthetic substances that barely break down — during the Q1 earnings call, triggering another wave of negative consumer sentiment in China.
This means → two unrelated incidents, but together they signal that lululemon lacks sensitivity to cultural and public-opinion risk in the Chinese market.
Can mainland China still grow?
Analyst Vasilescu cuts his FY2027 mainland China revenue growth forecast to flat — the Street consensus is still 11% growth. The gap is stark.
Q1 China comparable sales rose only 5%, driven largely by new store openings. In plain terms = existing stores are sluggish; the headline looks decent only because new doors are padding the number.
Once the new-store tailwind fades and the controversies compound, the analyst sees a real risk that mainland China same-store sales turn negative.
Who is taking share?
Vasilescu names three challengers: Anta's Maia Active, Korean brand Xexymix, and newcomer Alo — all accelerating their push into lululemon's China territory.
This reflects a market that has shifted from "lululemon dominance" to a multi-brand fight, where local and regional players' value-for-money edge gets amplified when the incumbent is embroiled in controversy.
What does this mean for the whole company?
Assuming mainland China stalls, Vasilescu cuts his FY27 total revenue forecast by 2%, yielding an EPS estimate of just $8 versus the Street's $11.31.
This means → if the analyst is right, the market's current earnings expectation for lululemon is overstated by nearly 30%.
Lululemon shares fell more than 5% on Monday to their lowest level since 2018. The gap between these two forecasts will be the key metric for judging whether lululemon's China strategy can be repaired.
Content is for reference only, not financial advice.