The Queen of Athleisure is Slipping. Is Lululemon’s Stock a “Deal or No Deal?”

When you hear the name “Lululemon,” what pops into your mind? Maybe it’s the image of someone who’s got their life together—like, really together. We’re talking $10 green juice in hand, fresh from a yoga class, rocking $100 leggings that scream “BOUGIE.” 

But here’s the thing—while Lululemon was once the go-to for those who live their best lives between Pilates and brunch, its reign as the queen of athleisure might be slipping. 

Lululemon’s U.S. sales have been a bit of a dumpster fire. That’s right, the land of overpriced avocado toast and yoga pants isn’t treating Lulu so kindly these days. Sales have really died down, dropping a brutal 5% in the latest quarter. And it’s not just the sales that are taking a hit; the stock has jumped off a cliff, losing 48% year-to-date. 

That’s right, nearly half its value, gone. Meanwhile, brands like Alo Yoga, Skims (thanks to Kim K. and her marketing magic), and Fabletics are circling like sharks, ready to feast on what’s left of Lululemon’s market share.

Now before you throw your Align leggings in the Goodwill pile, let’s dig a little deeper. Yes, Lululemon’s numbers in the U.S. aren’t exactly something to flex about at the gym. But let’s not write them off just yet. The company did report earnings per share of $3.15, beating analyst expectations of $2.93 by 7% in Q2 of fiscal year 2024. While that’s all well and good, the fact that the American market is struggling to keep pace is concerning, especially when you consider that the U.S. has been Lululemon’s bread and butter.

But here’s the thing: Yes, Lululemon’s stock has taken a beating lately, but that doesn’t mean it’s game over. Remember when Chipotle was basically a cautionary tale after their salmonella disaster in 2015? They bounced back, and so might Lululemon. The bad news has already been baked into the stock price—from the Breezethrough catastrophe to those sluggish U.S. sales—so maybe, just maybe, the worst is behind us.

For starters, Lululemon’s international presence is very strong, particularly in Mainland China, where net revenue surged by an impressive 37%. While the U.S. market has been limping along with just 3% growth year-over-year, Lululemon’s global footprint is expanding rapidly. Revenue outside of North America shot up 40% on a constant-currency basis, reaching $2.1 billion over the last 12 months. This international growth, especially in regions like Europe, Australia, and East Asia, could be the lifeline that pulls Lululemon through its current struggles.

And let’s not overlook Lululemon’s unique positioning. With only a 2.5% share of the global sportswear market, Lululemon has carved out a luxury niche that’s tough for competitors to penetrate. Brands like Vuori and Alo Yoga might be making money, but they haven’t eroded Lululemon’s strong brand image or its appeal. The company’s strategy of using social media to build local communities worldwide continues to pay off, making it difficult for anyone to knock Lulu off its throne on the global stage.

Now, let’s talk about the future. Despite the challenges, Lululemon has a clear path forward with its Power of Three x2 plan, which aims to double revenue by 2026. With a strong international presence and a proven ability to innovate, Lululemon could be at an inflection point—a prime buying opportunity for those who believe in comebacks. Even the company’s EPS of $3.15 in Q2, which beat expectations, suggests that Lululemon is still capable of delivering solid financial results.

Lululemon is also a brand with a strong moat, high gross margins (58.52%), and a loyal customer base. The company generated $9.8 billion in revenue over the past 12 months. To put that in perspective, Nike, the largest apparel brand in the world, pulled in over $50 billion. This gap suggests there’s plenty of room for Lululemon to double or even triple its sales as it strengthens its global presence.

So, should you start buying up Lululemon stock like it’s the last pair of overpriced leggings at the mall? The numbers and valuations suggest the stock is trading at a huge discount and let’s face it, if you’ve ever put on a pair of their pants, nothing else compares. There’s a reason every other brand name-drops Lululemon in their Instagram ads, trying to convince you they’re just as good. Spoiler alert: They’re not.

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Stock.News does not have positions in companies mentioned.