03:22 PM EDT, 06/06/2025 (MT Newswires) -- Lululemon Athletica's ( LULU ) Q1 results suggest potential underlying issues in the business as the retailer's US growth is unlikely to show significant acceleration, while its China sales growth may decelerate, UBS said in a note emailed Friday.

Lululemon reported fiscal Q1 net income late Thursday of $2.60 per diluted share on revenue of $2.37 billion, whereas analysts polled by FactSet expected EPS of $2.58 on revenue of $2.36 billion. The company also set its Q2 earnings guidance below estimates, while slashing its full-year earnings forecast.

"A pivotal LULU question is if the slowdown in its US business over the last 12+ months has been temporary, driven by one-off factors, or a sign of something more fundamental," UBS analysts said. Q1 results raised "the likelihood that something more fundamental is at play," they added.

The analysts said there is no indication that Lululemon's US growth rate will significantly increase, but while the US business could accelerate, tariffs could cause a slowdown, particularly in H2. Furthermore, the company's China sales growth could also decelerate.

UBS reiterated its neutral rating on the stock and slashed its price target from $330 to $290.

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