Lululemon Athletica's Next Earnings Report on June 4 Could Send the Stock Spiraling. Here's Why.

Lululemon Athletica (NASDAQ: LULU) is facing a big week, as the company is scheduled to issue its first-quarter earnings report after the closing bell on June 4. The report will be the first since the athleisure company settled a proxy fight with founder Chip Wilson, and the first since it announced it hired a new CEO who will take over in September.

Lululemon has been dealing with sagging revenue growth and shrinking margins, as the stock price has fallen more than 35% so far this year. Although the settlement with Wilson is a plus, analysts appear to be bracing for a weak report that could send shares down even further.

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About Lululemon stock

Lululemon became a household name as it popularized the athleisure wear trend -- comfortable athletic clothing, such as yoga pants and joggers, that could be worn both inside and outside the gym. Lululemon was a primary beneficiary of this trend, and its stock price briefly topped $500 in 2023. But it's been a long fall since. Lululemon stock is now more than 70% off its all-time high.

Revenue in the fourth quarter was $3.64 billion, up less than 1% from a year ago. Meanwhile, the cost of goods sold was $1.64 billion, up 14%. That sent gross profits down as well as net income, which dropped from $748.4 million to $586.8 million in the quarter. Sales in the U.S. were a weak spot, falling 6% from a year ago, although international sales were up 17%.

The company's dispute with its founder didn't help, either. Wilson, who stepped down as chairman more than a decade ago, continues to hold nearly 9% of Lululemon stock and has been a harsh critic of the company's leadership. After the board announced that it had hired former Nike executive Heidi O'Neill as its new CEO, Wilson issued a scathing letter to shareholders accusing the company of squandering "billions of dollars in brand power."

"Lululemon's challenges are rooted in the board's failure to understand the brand," he wrote on April 29. "The board allowed or enabled actions that consistently eroded the company's premium position."

Wilson put forward his own slate of directors for shareholders to consider at an annual meeting, but Lululemon announced a settlement of the proxy fight with its founder on May 27 that included a commitment that two of Wilson's candidates -- former ESPN chief marketing officer Laura Gentile and former On co-CEO Marc Maurer -- would join the board, and that it would appoint a third director by Oct. 1 that has product and brand expertise.

The settlement also includes a non-disparagement clause that prevents Wilson from publicly criticizing the company for 18 months.

What are analysts expecting?

Lululemon's own guidance for 2026 wasn't rosy. The company is expecting overall revenue growth of 2% to 4%, but for North America sales to fall 1% to 3% for the year. The company is expecting earnings per share in the range of $12.10 to $12.30, versus $13.26 in 2025. While Lululemon is seeking refunds from the U.S. government for tariffs paid over the last year, the impact of the tariff policy will continue to weigh on the company's bottom line at least through the first quarter, with management anticipating a negative impact of 110 basis points.

Several analysts who cover the stock have already cut their price targets for the sagging stock. Piper Sandler maintained a "neutral" rating but cut its target from $190 to $130, and Telsey Advisory Group dropped its target from $215 to $175. Robert W. Baird analysts also reduced their price target, dropping from $190 to $170, and JPMorgan Chase cut its target from $196 to $173.

Is Lululemon stock a buy now?

Lululemon is in a difficult position. While current management is working on initiatives to capitalize on international sales and improve both in-store and online experiences, the company continues to face significant headwinds and a CEO who won't be available to start work until late in the third quarter.

Wall Street appears to be bracing for the worst. If the company lowers its 2026 guidance or fails to meet analysts' tempered expectations, Lululemon investors could have a rough week.

JPMorgan Chase is an advertising partner of Motley Fool Money. Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase, Lululemon Athletica Inc., and Nike. The Motley Fool has a disclosure policy.