Core Viewpoint - Lululemon Athletica Inc. is facing growing challenges that are impacting its strong brand and high gross margins, leading to a downgrade by Needham to Hold status [2][3]. Group 1: Financial Performance - North American comparable sales decreased by 1% in Q4 2024 and by 3% in the first two quarters of 2025, attributed to declining demand and unexpected tariff exposure on U.S. e-commerce orders [2]. - Needham projects mid-single-digit earnings declines for FY2026, contrasting with Wall Street's flat growth prediction [3]. Group 2: Market Environment - The competitive landscape has intensified due to non-athletic apparel companies like Alo, Vuori, Fabletics, and Athleta [3]. - Younger consumers are shifting away from Lululemon's primary leggings category due to a trend towards denim, while the casual collection is also weakening [3]. Group 3: Brand and Product Strategy - Despite the challenges, new product releases may provide some support for Lululemon in 2025 [3]. - Lululemon designs, markets, and sells technical sportswear, accessories, and footwear for both men and women [4].