Bernstein Analyst: catalysts that led to significant growth for LULU have run out

Bernstein Analyst Aneesha Sherman discusses downgrading Lululemon to Underperform.

You can see the entire interview here.

Key Video Takeaways

00:14 On why growth for LULU has run out

00:28 On revenge spending

00:40 On why Bernstein downgraded LULU

Video transcript

ANEESHA SHERMAN: Lulu has been, as you said, a phenomenal growth story. It has grown at a 25% compound annual rate for the last five years, which is really significant growth.

But two things have changed. One is that the catalysts that drove that growth have run out. There was a catalyst of e-commerce investment and e-commerce growth. There was a catalyst of COVID where we wore athleisure at home for a year and a half. And then this year has been the year of revenge spending and getting out for social occasions and wearing more lifestyle and shoes and belt bags, and those have been highly successful products.

We don't see a catalyst like that for 2023. And on an $8 billion business, it's not going to maintain that clip. So we have it slowing down materially to kind of mid-- slightly below midteens growth for this year.

And the problem with that is that the growth-- the top-line growth drives all of the earnings growth. So a deceleration there is going to drive a deceleration in the earnings profile as well, which we think will halve from about 33% last year to more like midteens this year.