Lululemon stock price has moved from being one of the most beloved into a fallen angel, a trend that may continue after Gap, its key competitor, published weak results. LULU has plunged by 60% from its highest point in 2024.
LULU stock faces a triple-whammy
Lululemon was one of the best-performing companies during its peak as it became the leading player in the athleisure industry. This growth accelerated during the pandemic, when most people stayed nd worked from home.
Its success, however, has hit a major wall as its growth slows, competition rises, and tariffs hurt its business. At its prime, Lululemon was the main name in the athleisure industry.
Today, more names, including popular brands like Nike, Adidas, The Gap, Under Armour, Vuori, and Fabletics have entered into the business.
As a result, Lululemon has transitioned from a company that generated double-digit growth rates to one with single-digit growth rates. The most recent results showed that its revenue rose by 7% to $2.4 billion in the first quarter.
Its important America’s segment which has higher margins, grew by 3%, while the international business grew by 20% during the quarter. The closely watched comparable sales rose by 1% in Q1, while its income from operations increased to $438 million.
Lululemon stock has also crashed because of Donald Trump’s tariffs on goods shipped from countries like Indonesia and Vietnam, where it makes most of its products. Talking about these challenges, the CEO said:
“As we navigate the dynamic macroenvironment, we intend to leverage our strong financial position and competitive advantages to play offense, while we continue to invest in the growth opportunities in front of us.”
Read more: Lululemon founder Chip Wilson pledges shares for loans worth over $500 million
LULU navigates tariff headwinds
The impact of tariffs will likely hurt it business substantially in the coming months as the company will have to “eat” some of them.
This view was confirmed when The Gap, which owns Athleta, published its financial results. It said that its operating margins will plunge to as low a 6.7% this year, much lower from what it made last year. The CEO said:
“The downside of this quarter came from tariffs, which will impact margins going forward. This is a shame as it undoes some of the financial progress Gap has been making on the bottom line.”
Analysts anticipate single-digit revenue growth and constrained margins this year. The average estimate is that the company’s revenue will be between $11.1 billion and $11.3 billion, representing a 8% annual growth rate.
The only major catalyst for the LULU stock price is that it is no longer priced to perfection. It forward price-to-earnings ratio is 14, much lower than the sector median of 18. This figure is also much lower than its five-year average of 40.
Lululemon is also repurchasing tons of stock, which has brought the outstanding shares to 114.9 million from the pandemic high of 125.1 million.
Lululemon stock price analysis
The daily timeframe shows that the LULU stock price has slumped in the past few years, moving from $516 in December 2023 to $200 today. It recently slumped below the important support level at $227, invalidating the forming double-bottom pattern.
The LULU stock price has remained below the 50-week and 200-week moving averages. Therefore, the most likely scenario is where it continues to plunge in the near term. It will then rebound in 2026 as the impact of the tariffs fade.
Read more: Lululemon shares fall after Wells Fargo warning as brokerages cut forecasts — is the stock a buy at record-low valuations?
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