Downgrade to Neutral on Reduced Visibility. In a Holding Pattern for Now, with a Harder Reset Likely on the Way.

Research evidence excerpt

Downgrade to Neutral on Reduced Visibility. In a Holding Pattern for Now, with a Harder Reset Likely on the Way.

Investment Thesis

While we acknowledge significant self-help opportunity and a relatively inexpensive valuation, we see reduced visibility into

estimates and remain more comfortable on the sidelines. We note areas of uncertainty ahead including: (1) the source of

product challenges - management noted some "positive signals" in North America, with certain launches resonating while others

underperformed, (2) both China and ROW missed slightly in Q1 and while this was largely attributed to transitory issues/the revCONSUMER outlook was reiterated, we see added uncertainty, (3) marketing is being stepped up ~50-100 bps YoY, but we remain unsure if this

will be enough, (4) guidance does not assume meaningful improvement in N. America, but we also note the company is lapping

heavier markdown sales as the year progresses, adding risk as it reduces promotions, (5) unit growth plans remain largely intact

for now, but we see potential for this to be reassessed under new leadership.RETAIL

AND Upcoming■ Q2 EarningsCatalysts(est. early September) Price$450 Performance

■ Benefits from new leadership (including new Board members and new CEO Heidi $400

O'Neill beginning in September) $350

■ Expansion of men's, international, new product categories $300

■ Cost savings, offset by marketing investments

$250 ■ Increased new product innovation building throughout '26LIFESTYLE $200

Base Case Assumptions $150

$100

■ Revenue declines 1% in 2026, followed by ~2% growth in '27 Jul-25 Aug-25 Sep-25 Oct-25 Nov-25 Dec-25 Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26 ■ '26 gross margin contracts ~100 bps YoY, due in large part to fixed cost deleverage

LULUBRANDS along with higher tariffs.