Lululemon Athletica (NASDAQ:LULU) shares slid on Tuesday as Bernstein reduced its rating on the stock to a Sell-equivalent.

Equity analyst Aneesha Sherman warned that the stock “has a reset coming” as earning growth begins to moderate. A more cautious consumer is impacting the company in 2023, which is already reflected in stepped-up promotions, in her view.

“With pent-up demand running out, a more cautious North American consumer, higher promotions, and new categories too small to offset a softer core business, it’s time for that reality check,” she told clients.

Sherman added that margins are already “maxed out” and therefore likely only have room to contract. While management has hinted at this trajectory, Sherman advised that investor expectations are detached from this reality.

“FY23 guidance has not yet been given and mgmt will have every incentive to set expectations reasonably or even conservatively to avoid another expectations-reality gap in the months to come,” Sherman concluded. “Hence we expect the FY23 guide to be sobering and to confirm the slower-growth trajectory we expect to see.”

Sherman reduced her price target to $290 from a prior $340 alongside the downgrade to Underperform from Market-Perform. Shares of the Vancouver-based retailer fell 2.14% in premarket trading on Tuesday.

Dig into sell-side ratings on the stock.