lululemon athletica inc. (NASDAQ:LULU) has experienced a 10% decline in the past three months, underperforming peers and broader market indices. While the stock shows near-term weakness, long-term fundamentals and international momentum could support future growth. This lululemon stock analysis examines performance trends, challenges, and valuation to help investors decide whether LULU represents an attractive buying opportunity.

LULU’s Recent Price Performance

Over the past three months, lululemon stock has fallen 10%, compared with a 6.8% decline in the Textile – Apparel industry and a 9.7% drop in the Consumer Discretionary sector. Meanwhile, the S&P 500 ($SPX) gained 7.6% during the same period. Competitors such as Guess Inc. (NYSE:GES), G-III Apparel Group (NASDAQ:GIII), and Hanesbrands (NYSE:HBI) performed better, rising 1.5%, 9.2%, and 4.5%, respectively.

At its current price of $181.94, LULU trades 14.2% above its 52-week low of $159.25 and 57% below its 52-week high of $423.32. The stock continues to trade above its 50-day moving average, signaling cautious near-term optimism despite a broader downtrend.

Factors Affecting lululemon’s Growth

The stock’s underperformance is largely driven by soft U.S. demand, particularly in the casual and lounge categories, combined with margin pressures. While performance apparel remains strong, weaker lifestyle product sales have hurt overall demand and traffic in its largest market.

Profitability challenges have emerged due to rising product costs, increased markdowns, and elevated tariffs. The removal of the U.S. de minimis exemption and higher reciprocal tariffs have further constrained margin flexibility. To mitigate these pressures, management is focusing on selective pricing, vendor negotiations, and disciplined cost control.

SG&A expense deleverage is also weighing on near-term results, largely due to planned investments in digital marketing, seasonal store openings, and initiatives designed to fuel long-term growth.

Product Refresh and Innovation Initiatives

lululemon is actively refreshing its product engine and accelerating design cycles to reenergize demand in categories that have lost relevance. New creative leadership and enhanced product innovation aim to improve brand engagement and restore momentum over time. Although these initiatives may take several seasons to fully impact results, management remains confident in their long-term benefits.

Earnings Estimates and Outlook

Analysts are slightly revising their estimates for LULU. The Zacks Consensus Estimate for fiscal 2025 and 2026 EPS declined by a penny and 0.5%, respectively, over the past week. For fiscal 2025, revenue is expected to grow 3.7% year-over-year, while EPS is projected to decline 11.9%. For fiscal 2026, revenue and EPS estimates suggest growth of 5.1% and 0.7%, respectively.

Valuation Compared to Peers

LULU’s forward 12-month price-to-earnings (P/E) ratio stands at 14.02X, below the industry average of 16.28X and the S&P 500 average of 23.48X. While this suggests the stock is relatively cheap, competitors like GES, GIII, and HBI trade at higher multiples, with forward P/Es of 9.76X, 10.05X, and 10.14X, reflecting stronger near-term growth trajectories.

Long-Term Fundamentals Remain Strong

Despite near-term softness, lululemon retains key long-term advantages. The brand demonstrates strong consumer loyalty, a growing membership base, and market leadership in performance apparel. International markets, particularly China, provide additional growth opportunities, while investments in design talent and faster product development cycles aim to lift innovation and brand relevance.

Strong cash flow, disciplined investment strategies, and balance sheet flexibility give LULU a durable foundation to weather short-term challenges. Once product refreshes and assortment rebalancing take hold, the company is well-positioned to regain momentum.

Is Lululemon Stock a Buy Now?

The 10% dip in Lululemon stock reflects meaningful near-term challenges, from U.S. demand softness to margin pressures and downward estimate revisions. However, the stock’s attractive valuation, above-trend performance apparel growth, and international expansion suggest a potential entry point for long-term investors.

Investors considering Lululemon stock should weigh near-term risks against robust fundamentals and the company’s ability to innovate and adapt. For those with a longer investment horizon, lululemon’s brand strength and strategic initiatives make it a stock worth monitoring.

Featured Image: Unsplash @ Marco Tjokro

Please See Disclaimer