Lululemon Stock: Down 60%, Is the Worst Over?

Lululemon's stock has fallen 60% from its highs, but its valuation looks cheap due to its long runway for international growth. Despite slowing growth in North America, the brand has a strong omnichannel retail strategy and is expanding into new product categories. Profit margins remain high at over 23%, and investors may be rewarded by buying and holding Lululemon stock for the long haul. Shares may fall further, but the company's potential for growth in China and other geographies makes it a promising investment.

Lululemon Athletica Inc. (NASDAQ: LULU) has seen its stock price fall by 60% from its all-time highs, trading at one of its lowest valuations in years. The decline is largely attributed to slowing revenue growth in North America and increased competition in the athleisure apparel market. However, despite these challenges, Lululemon's stock presents an attractive opportunity for investors due to its strong international growth prospects and robust financial performance.

Slowing North American Growth and Competition

The core issue for Lululemon is the slowdown in North American revenue growth, which has declined to a five-year low of 7.32% in the latest quarter. This slowdown is part of a broader trend in the athleisure category, which boomed during the pandemic but has since returned to more normal levels. Despite this, Lululemon has maintained a 4% year-over-year growth rate in constant currency in North America, outperforming many of its competitors like Nike [1].

International Expansion and High Profit Margins

Lululemon's management is focusing on capitalizing on international markets, particularly in China and Europe. China mainland revenue is growing at a robust 22% year-over-year, presenting a significant growth opportunity for the brand. Additionally, Lululemon has been maintaining high profit margins, with operating margins above 23% over the last 12 months, indicating the company's ability to retain its premium pricing strategy despite increased competition [1].

Valuation and Buyback Program

Lululemon's current price-to-earnings ratio (P/E) of 12.6 is a five-year low and significantly lower than its previous peak of 90 in 2021. This discounted valuation suggests that the stock does not need extraordinary performance to generate positive returns for investors. Moreover, Lululemon's share buyback program has been accelerating, with $1.77 billion repurchased over the last 12 months, which equates to 8% of the current market cap. This buyback program will likely boost earnings per share (EPS) growth, even if the stock price remains volatile in the short term [1].

Institutional Investor Support

Institutional investors have been increasingly bullish on Lululemon. Mizuho Markets Americas LLC, for example, increased its stake in Lululemon by 134.2% to 22,025 shares in the first quarter, valued at approximately $6.23 million. This support from institutional investors indicates confidence in the company's long-term prospects [2].

Conclusion

While Lululemon's stock has faced significant headwinds due to slowing North American growth and increased competition, its strong international growth prospects, high profit margins, and attractive valuation make it a promising investment for long-term investors. Despite potential short-term volatility, the company's strategic focus on international expansion and share buybacks positions it well for future growth. Investors may be rewarded by holding onto Lululemon stock for the long haul.

References:
[1] https://www.nasdaq.com/articles/whats-wrong-lululemon-stock
[2] https://www.marketbeat.com/instant-alerts/filing-mizuho-markets-americas-llc-has-623-million-stock-holdings-in-lululemon-athletica-inc-nasdaqlulu-2025-08-09/