Lululemon Athletica's (LULU) US fundamentals are a "bit more challenged" than previously thought as suggested by the company's Q4 results, UBS said in a research note.

Building on this, UBS said that the company's US business has two main challenges. First, the company's product assortment is not resonating with consumers as they did before and second, Lululemon needs to drive traffic back to its stores and website which requires incremental marketing spend that might not be in the company's fiscal 2026 plan, UBS said.

UBS lowered its adjusted earnings per share estimate for fiscal 2026, 2027 and 2028 to $12.65, $14.30, and $15.90 from $12.80, $14.55, and $16.15, respectively.

UBS said it now anticipates greater selling, general, and administrative expenses to deleverage over fiscal 2026 on account of higher incentive compensation, store labor hours, and greater marketing expenses. This will be partially offset by sales growth within Lululemon's China Mainland business, according to UBS. The bank maintained its neutral rating.

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