lululemon athletica inc.LULU has lost momentum in recent months, with its shares recording a 15.3% decline in the past three months. lululemon’s recent performance points to a business that is losing traction, particularly in its core North America market, which helps explain the stock’s sharp decline. Although the company posted modest revenue growth and an earnings beat in fourth-quarter fiscal 2025, underlying demand trends were weak, with North America sales flat to down and comparable sales slipping as heavy markdowns eroded full-price momentum. Margin pressure intensified as tariffs and discounting weighed significantly on profitability, underscoring that growth is becoming more costly to maintain.
LULU’s 15.3% stock decline is greater than the Textile - Apparel industry and the Consumer Discretionary sector’s decline of 2.5% and 2.1%, respectively, in the past three months. The stock also underperformed the S&P 500’s gain of 1.4% in the same period.
LULU’s performance is significantly weaker than that of Kontoor Brands, Inc.KTB, Columbia Sportswear CompanyCOLM and Ralph Lauren CorporationRL, which rallied 30%, 17% and 4.1%, respectively, in the past three months.
LULU’s 3-Month Price Performance
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At the current share price of $163.45, lululemon trades 13.5% above its 52-week low of $143.96. Meanwhile, LULU stock’s price is 52% below its 52-week high of $340.25. Moreover, the stock trades below its 50 and 200-day moving averages, indicating a bearish near and long-term sentiment.
LULU Stock Trades Below 50 and 200-Day Moving Averages
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What’s Hindering lululemon’s Growth?
lululemon’s growth is being constrained by a combination of regional weakness, margin pressure and execution challenges. The most significant drag is North America, where sales trends remain soft and comparable sales declined, reflecting weaker demand and an overreliance on markdowns to drive volume. Elevated discounting has diluted the brand’s premium positioning and hurt full-price sell-through, forcing the company to reset its pricing and inventory strategy.
Margins are under further pressure from external cost headwinds, particularly tariffs, which had a substantial negative impact on product margins and overall profitability. At the same time, higher investments in marketing, store operations and technology are driving expense deleverage, limiting earnings growth despite stable top-line performance.
The company is still in a transition phase. Management has acknowledged the need to improve product innovation, accelerate speed to market and refine assortments, indicating prior missteps in merchandising and execution. While new product launches and brand activations are generating early positive signals, these efforts will take time to scale. Combined with cautious consumer behavior and uneven regional demand, these factors continue to weigh on lululemon’s near-term growth trajectory.
Here’s How Estimates Are Shaping Up for LULU
The Zacks Consensus Estimate for lululemon’s fiscal 2026 and 2027 EPS decreased 0.4% and 0.3%, respectively, in the past 30 days. The downward revision in earnings estimates indicates that analysts are skeptical about the company’s near-term growth potential.
For fiscal 2026, the Zacks Consensus Estimate for LULU’s revenues implies 3.5% year-over-year growth, while the EPS estimate suggests a 6.9% decline. The consensus mark for fiscal 2027 revenues and earnings indicates 5.6% and 8.9% year-over-year growth, respectively.
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LULU’s Valuation Picture
lululemon’s forward 12-month price-to-earnings (P/E) multiple is 12.99X. This multiple is lower than the industry average of 18.55X and the S&P 500’s average of 21.87X, making the stock appear relatively cheap.
The company is trading at a lower valuation than some of its competitors. Its peers, such as Columbia Sportswear and Ralph Lauren, are delivering solid growth and trade at higher multiples than LULU. Columbia Sportswear and Ralph Lauren have forward 12-month P/E ratios of 17.2X and 20.69X —significantly higher than LULU. Meanwhile, Kontoor Brands trades at a lower multiple of 11.51X.
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Are lululemon’s Long-Term Growth Fundamentals Intact?
Despite near-term challenges, lululemon’s long-term growth fundamentals remain largely intact, supported by strong brand equity, product innovation and global expansion opportunities. The company continues to hold a leading position in premium activewear, particularly as the top women’s brand in the United States, while maintaining a loyal and engaged customer base. Its international business, especially in China and other emerging markets, remains a key growth driver, delivering robust momentum and offering a long runway for expansion.
lululemon is also investing in innovation and operational improvements, including increasing product newness, enhancing quality and shortening its go-to-market cycle. Digital capabilities, AI integration and targeted brand activations are expected to strengthen customer engagement over time.
However, management acknowledges that rebuilding full-price momentum and stabilizing North America will take time. While execution risks persist, the company’s strategic initiatives and global diversification provide a solid foundation for sustainable long-term growth.
Is LULU Stock Still a Buy Option?
lululemon’s recent stock performance reflects clear near-term weakness, as investors have grown more cautious about the company’s ability to quickly restore momentum in its core business. That caution is reinforced by negative estimate revisions, which suggest that the market remains skeptical about near-term earnings delivery and the pace of recovery.
The stock’s cheaper valuation could still appeal to investors who believe in lululemon’s long-term growth story, supported by its brand strength, international runway and innovation pipeline. For now, however, the risk-reward appears balanced rather than compelling.
Existing shareholders may be better served by holding the stock and closely tracking management’s execution, especially around North America, full-price selling and margin recovery, before increasing exposure. New investors, meanwhile, may want to watch for clearer signs that this Zacks Rank #3 (Hold) company’s strategic initiatives are translating into more durable growth and earnings stability before getting on board. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Columbia Sportswear Company (COLM) : Free Stock Analysis Report
Ralph Lauren Corporation (RL) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
Kontoor Brands, Inc. (KTB) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
