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Down 48% From Its Peak, Is This Market-Crushing Growth Stock a Buy Now?
LULUlululemon(LULU) The Motley Fool· The Motley Fool·2025-06-08 19:43

Core Viewpoint - Lululemon athletica has been a top-performing consumer stock over the last 20 years, significantly contributing to the growth of the athleisure market and becoming one of the most valuable apparel companies globally [1][2]. Financial Performance - Since its IPO in 2006, Lululemon's stock has increased approximately 1,800%, with over 300% growth in the last decade, although it has recently faced challenges, dropping 48% from its peak [2]. - In the first quarter, comparable sales growth slowed to 1%, with revenue rising 7% to 2.37billion,matchingestimates[3].Grossmarginimprovedfrom57.72.37 billion, matching estimates [3]. - Gross margin improved from 57.7% to 58.3%, but operating income only rose 1% to 438.6 million, with operating margin declining by 110 basis points to 18.5% due to increased expenses [3]. - Earnings per share increased from 2.54to2.54 to 2.60, slightly surpassing the consensus estimate of 2.59[4].GuidanceandChallengesThecompanymaintaineditsfullyearrevenueguidanceat2.59 [4]. Guidance and Challenges - The company maintained its full-year revenue guidance at 11.15 billion to 11.3billion,indicatinga611.3 billion, indicating a 6% growth at the midpoint, but reduced its earnings-per-share guidance from 14.95-15.15to15.15 to 14.58-$14.78 due to tariff impacts [6]. - Second-quarter guidance also fell short, with expectations of a 160 basis point decline in operating margin, affecting earnings per share [7]. Growth Opportunities - Despite slowing growth in North America, Lululemon sees significant potential in China, where revenue increased by 21% with 7% comparable sales growth in the first quarter, accounting for 13% of total revenue last year [8][9]. - The company currently operates 154 stores in China, representing 20% of its total, with plans to exceed its initial goal of 200 stores [10]. Investment Perspective - The challenges posed by tariffs are consistent with those faced by other retailers in the apparel sector, suggesting that they may not be a major concern for investors [11]. - Following the guidance cut and subsequent stock sell-off, Lululemon trades at a forward P/E of 18, which is considered attractive given its brand strength and growth potential in China [12].