Is Nike the better play over Lululemon as activewear stocks face summer demand slump?

Nike's resilience in net income and revenue, despite a diluted EPS decline, positions it as a stronger candidate for investment amid summer demand slumps. Here's why Nike edges Lululemon in this scenario:

1. **Financial Performance and Growth Rates**:
- Nike reported a net income of $211 million and total revenue of $11.1 billion, with a diluted EPS of $0.14 for the latest quarter. This indicates robust revenue stability and a strong market presence.
- Lululemon, on the other hand, posted a net income of $314.57 million and total revenue of $2.37 billion, with a diluted EPS of $2.6. While these figures are impressive, the year-over-year growth rates show a decline in net income (-0.86%) and revenue (-0.12%) for Nike, compared to Lululemon's slight revenue growth (0.07%) and stable net income (-0.02%).

|code|Ticker|Name|Date|Total Revenue|Net Income|Diluted EPS|market_code|
|---|---|---|---|---|---|---|---|
|LULU|LULU.O|Lululemon Athletica|2024 Q1|2.000792E9|2.90405E8|2.28|185|
|NKE|NKE.N|NIKE|2024 Q1|1.2939E10|1.45E9|0.94|169|
|LULU|LULU.O|Lululemon Athletica|2024 Q2|2.209165E9|3.41603E8|2.68|185|
|NKE|NKE.N|NIKE|2024 Q2|1.3388E10|1.578E9|1.03|169|
|LULU|LULU.O|Lululemon Athletica|2024 Q3|2.204218E9|2.48714E8|1.96|185|
|NKE|NKE.N|NIKE|2024 Q3|1.2429E10|1.172E9|0.77|169|
|LULU|LULU.O|Lululemon Athletica|2024 Q4|3.205103E9|6.69468E8||185|
|NKE|NKE.N|NIKE|2024 Q4|1.2606E10|1.5E9|0.99|169|
|LULU|LULU.O|Lululemon Athletica|2025 Q1|2.208891E9|3.21421E8|2.54|185|
|NKE|NKE.N|NIKE|2025 Q1|1.1589E10|1.051E9|0.7|169|

|code|Ticker|Name|Date|Net Income YoY|Total Revenue YoY|Diluted EPS YoY|market_code|
|---|---|---|---|---|---|---|---|
|LULU|LULU.O|Lululemon Athletica|2025 Q1|10.68025688262943|10.400831270816758|11.403508771929834|185|
|NKE|NKE.N|NIKE|2025 Q1|-27.51724137931034|-10.433572919081847|-25.53191489361702|169|
|LULU|LULU.O|Lululemon Athletica|2025 Q2|15.022994528736575|7.329149248698037|17.53731343283581|185|
|NKE|NKE.N|NIKE|2025 Q2|-26.29911280101394|-7.723334329250074|-24.271844660194176|169|
|LULU|LULU.O|Lululemon Athletica|2025 Q3|41.47575126450461|8.730624647834288|46.42857142857144|185|
|NKE|NKE.N|NIKE|2025 Q3|-32.25255972696246|-9.33301150535039|-29.87012987012987|169|
|LULU|LULU.O|Lululemon Athletica|2025 Q4|11.790705455675253|12.679592512315516||185|
|NKE|NKE.N|NIKE|2025 Q4|-85.93333333333332|-11.970490242741553|-85.85858585858585|169|

2. **Valuation Metrics**:
- Nike's P/E ratio stands at 34.24, indicating higher investor expectations relative to earnings. This can be justified by Nike's strong global brand and diversified product portfolio, which provide resilience against seasonal demand fluctuations.
- Lululemon's P/E ratio is lower at 12.25, suggesting relatively lower valuation pressures. However, its higher EPS of $2.6 indicates a stronger earnings profile, which might be more vulnerable to seasonal fluctuations.
- Nike's P/S ratio is 2.38, reflecting its strong market position and future growth potential. Lululemon's P/S ratio is 2.06, which, while indicating a reasonable market valuation, does not provide the same level of confidence in its future revenue growth stability.
- Nike's Price-to-Book (P/B) ratio is 8.34, indicating a premium valuation, which could be attributed to its strong brand equity and global reach. Lululemon's P/B ratio is 5.16, suggesting a more moderate valuation based on its current assets.

|code|Ticker|Name|Date|P/E(TTM)|P/S|Price to Book Ratio|market_code|
|---|---|---|---|---|---|---|---|
|LULU|LULU.O|Lululemon Athletica|20240805|17.507885|3.0222446920492256|6.630985578822544|185|
|NKE|NKE.N|NIKE|20240805|18.786704|2.0848918613075815|7.420943574530838|169|
|LULU|LULU.O|Lululemon Athletica|20240806|17.770429|3.067565413652363|6.730421952112514|185|
|NKE|NKE.N|NIKE|20240806|19.070793|2.116419209532339|7.533161707553708|169|
|LULU|LULU.O|Lululemon Athletica|20240807|17.510886|3.0227626431532615|6.632121994517286|185|
|NKE|NKE.N|NIKE|20240807|19.102359|2.119922248223979|7.545630389000694|169|
|LULU|LULU.O|Lululemon Athletica|20240808|18.134238|3.130366985016711|6.8682123551000425|185|
|NKE|NKE.N|NIKE|20240808|19.51534|2.1657536711062653|7.708762304598753|169|
|LULU|LULU.O|Lululemon Athletica|20240809|17.906951|3.091132188885995|6.782128866223298|185|
|NKE|NKE.N|NIKE|20240809|19.554797|2.1701324694708153|7.724348156407485|169|

3. **Market Sentiment and Analyst Ratings**:
- Both companies have been rated "Neutral" by analysts, with average price targets of $72.08 for Nike and $310.15 for Lululemon. This suggests a cautious outlook, but Nike's lower price target might indicate more modest growth expectations.
- Nike's resilience in financial performance and market position makes it a more attractive investment during periods of demand slump, as it has a proven track record of navigating challenging market conditions.
4. **Strategic Positioning and Risk Management**:
- Nike's diversified product portfolio and global reach provide a buffer against localized demand slumps. Its early investment in digital technologies and direct-to-consumer channels also enhance its ability to adapt to changing consumer behaviors.
- Lululemon's strong brand recognition and focus on the premium segment could be more susceptible to shifts in consumer preferences and economic conditions.

**Conclusion**: Nike's broader market presence, stronger financial performance, and more stable revenue growth make it a more resilient investment during summer demand slumps. While Lululemon remains a strong player in the activewear market, Nike's strategic positioning and financial strength position it as a better play in this context.