Once a high-flying star in the athletic apparel sector, Lululemon now confronts the most severe challenge in its corporate history. As international markets demonstrate robust growth, the company’s foundational North American operations are experiencing a startling contraction. The critical question facing investors is whether the yoga-wear pioneer can arrest its precipitous decline.
International Expansion Offers a Glimmer of Hope
Contrasting sharply with its domestic troubles, Lululemon’s business outside North America is flourishing. The company’s international revenue surged by 22% globally last quarter. Particularly impressive was the performance in China, its second-largest market, where sales expanded by an impressive 25%.
This international momentum is fueling an aggressive store opening strategy. Management has outlined plans to launch 40 to 45 new stores this year, with the majority slated for locations beyond North America. Looking further ahead, a strategic entry into the Indian market is scheduled for 2026—a clear move to reduce the company’s heavy reliance on its struggling home turf.
A Troubling Outlook for Core Markets
The company’s recent financial forecast delivered a severe blow to investor confidence. Instead of the anticipated 5-7% growth for 2025, Lululemon now projects a modest increase of just 2-4%. More alarming is the expectation for the crucial U.S. market, where management anticipates a 1-2% contraction. Analysts point to an outdated product lineup and increasing tariff pressures as primary factors squeezing profit margins.
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This disappointing guidance overshadowed what initially appeared to be a solid quarterly performance. The company reported earnings of $3.10 per share, comfortably exceeding analyst projections. However, a slight revenue miss—$2.53 billion against expectations of $2.55 billion—coupled with the drastically reduced outlook, triggered another sharp selloff in the stock.
Market Experts Maintain Cautious Stance
Despite the encouraging international results, financial analysts remain predominantly skeptical about Lululemon’s near-term prospects. While the average price target of $244.25 might suggest substantial upside potential, the majority of experts maintain a “hold” rating on the shares. This caution is well-founded: the stock has plummeted over 60% since the beginning of the year, currently trading around €144—a far cry from its all-time high of €404.
The path to recovery for Lululemon appears to run directly through its home market. Until the company can revitalize its core North American business, any sustained rebound in shareholder value seems unlikely.
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