Lululemon is facing a growth inflection point — and it may not bode well for investors, Bernstein warned. Analyst Aneesha Sherman downgraded the fitness apparel stock to underperforming the market. She also cut her price target from $50 to $290, which would mean an 8.3% drop from Monday’s closing stock price. “The gap between expectations and reality has been our biggest concern over the past year,” she said in a note to clients Monday. “Now that pent-up demand, a more cautious consumer outlook, and a shift in margins are negative, earnings growth will decelerate significantly and we expect this to follow.” Shares were down 2.6% before the bell. It has lost 18.2% in 2022, meaning it has modestly outperformed the broader market. 2022 marks what Sherman calls an amnesty for those hoping Lululemon can avoid the fate of diminishing after years of growth, as pent-up demand revived the business. But Sherman said revenue growth expectations of 20% or more would be “reality-checked”. That’s because pent-up demand has almost been met and North American consumers are becoming more cautious. The more promotional environment and the fact that Lululemon’s new categories aren’t large enough to offset its softer core business also play a role. She predicts revenue growth will slow to 13% in fiscal 2023, which she says is already reflected in management’s medium-term goals but not investor expectations yet. . Sherman said the company’s focus on high prices and few promotions drives “industry-leading margins”. That said, Lululemon will feel structural headwinds from non-core category expansion, a slowdown in international stores, and its need to rely more heavily on marketing and promotions. This changing environment will result in earnings per share growth slowing from the 39% compound annual growth rate seen over the past 5 years to 33% for 2022, 12% for 2023 and somewhere else. in the average range afterwards. That puts Lululemon behind other high-growth athletic apparel companies and its pre-Covid growth, Sherman noted. The “growth reset,” as she calls it, could lead to a further drop in ratings beyond the 2023 guidance. Lululemon will also feel limited margin increases, she said. — Michael Bloom of CNBC contributed to this report.