Lululemon Athletica (LULU), once a hallmark of growth investing with a more than 10x return since its 2007 IPO, now finds itself in uncharted territory—ranking among the 10 worst-performing stocks in the S&P 500 (SPX) in 2025. Year-to-date, shares have plunged almost 60% and now sit more than 50% below their 52-week high of $423.32. The decline steepened earlier this month, with a single-day drop of 20% after the apparel maker’s management cut full-year guidance alongside Q2 earnings.
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Yet despite the near-term pain, I see reasons for optimism. Lululemon’s strong profitability, sturdy balance sheet, ongoing buybacks, inexpensive valuation, and growing international presence make the stock look increasingly attractive at current levels. I remain quietly Bullish.
From Trendsetter to Trouble as LULU Slashes Outlook
While Lululemon continues to experience international growth and strength in its performance apparel segment, significant challenges in the U.S. market, revenue guidance reductions, and adverse impacts from tariffs and the removal of the de minimis provision have overshadowed these achievements.
Shares of Lululemon were already sliding before collapsing another 20% in a single session after Q2 earnings were published on September 4th. While the report contained some negative surprises, I believe the market’s reaction was excessive.
First, the bad news. Management trimmed full-year revenue guidance to $10.85–$11 billion, down from $11.15–$11.3 billion previously, implying only 2–4% growth for the year. EPS guidance was also cut to $12.77–$12.97, well below the prior $14.58–$14.78 range and short of consensus at $14.58. Embedded in this outlook is a $240 million reduction in gross profit due to tariffs.
Beyond tariffs, weakness in North America looms large. Same-store sales in the Americas fell 4%, which management chalked up to letting product cycles “run too long” and missing chances to spark new trends. The company now faces the dual challenge of shifting consumer preferences and intensifying competition from fast-rising rivals like Alo Yoga and Vuori.
Looking on the Bright Side
On the positive side, management is tackling its missteps head-on with clear home improvement plans. CEO Calvin McDonald admitted the company’s lounge and social product offerings have become “stale” and have not been “resonating” with guests. To remedy this, Lululemon will boost the share of new styles in its assortment to 35% (from 23%) and accelerate its design pipeline to refresh products more quickly.
And while North American sales disappointed, overall revenue still climbed 6.8% in Q2, powered by impressive international momentum—a segment that could become Lululemon’s most important growth engine. International sales jumped 22% (20% in constant currency), driven by a 25% gain in China, where the company also opened five new stores during the quarter.
Beyond China, revenue from the “Rest of World” advanced 19% (15% in constant currency), driven by new store openings in Italy, Belgium, and Turkey. Lululemon is also laying the groundwork for entry into India, having selected a franchise partner and targeting its first store launch in the second half of 2026—a move that positions the brand in yet another massive, untapped market.
Rock Bottom Valuation Makes LULU Worth a Spec Buy
Following the selloff, Lululemon shares look remarkably cheap. The stock now trades at just 12.4x 2025 earnings estimates—a steep discount to the S&P 500’s 22.5x multiple, nearly double LULU’s valuation.
Yes, the company faces tough challenges, but those headwinds appear well-priced in. At this valuation, the stock carries a more defensive profile, with limited downside already baked in. When expectations are this low, even modestly positive news—or just one solid quarter—can be enough to reset sentiment and spark a rebound.
Lululemon Buybacks Look Even Smarter at Today’s Lower Prices
Lululemon is also returning capital through buybacks, having repurchased 1.1 million shares in Q2 at an average price of $247—well above where the stock trades today. With roughly $860 million left on its $1 billion authorization, the company is positioned to repurchase more stock at these lower levels. Such buybacks are typically accretive, reducing the share count, boosting earnings per share, and concentrating ownership among existing investors.
LULU’s Fortress Balance Sheet and Industry-Leading Margins
The company also boasts a rock-solid balance sheet, with no long-term debt and $1.2 billion in cash. Despite the stock’s steep decline, this is hardly a business in distress.
Moreover, Lululemon remains highly profitable with enviable margins. Gross margin slipped 1.1 points to 58.5% from 59.6%, partly due to tariffs; however, these levels remain exceptional for an apparel retailer, underscoring the brand’s pricing power and consumer appeal. For context, Lululemon’s margins far exceed those of peers like Nike (NKE), at 42.2%, and Under Armour (UAA), at 48.2%.
Is LULU a Good Stock to Own?
Turning to Wall Street, LULU earns a Hold consensus rating based on five Buys, 18 Holds, and one Sell rating assigned in the past three months. The average LULU stock price target of $203.29 implies ~25% upside potential over the coming twelve months.
Lululemon’s Selloff is a Buying Opportunity
Despite the recent negativity clouding the stock, I remain bullish on Lululemon. The company is highly profitable, carries a debt-free balance sheet, and continues to repurchase shares, even as it grapples with slowing sales. Management has outlined clear steps to reinvigorate growth, and international momentum remains a powerful tailwind. Coupled with today’s deeply discounted valuation, these factors make Lululemon an attractive buying opportunity for long-term investors.