Lululemon Stock Tumbles 48% – Should You Catch This Falling Knife?

Lululemon (LULU) is having a rough year, down nearly half since January. Here’s the thing though – the dip isn’t just market noise.

The Numbers Don’t Lie:

• Earnings basically flat in first half of 2025 (net income down 4% YoY to $685M)
• Comparable store sales barely budged: +1% in Q2, but Americas dragged it down with -4% decline
• International actually firing (+15%), which tells you something
• EPS guidance for full year: $12.77-$12.97 – that’s an 11.4% drop vs. 2024

Why the Bloodbath?

Lulu’s facing the perfect storm. Revenue growth keeps decelerating, consumer wallets are getting tighter with inflation eating into discretionary spending, and the athletic wear market is getting crowded – Nike, Adidas, Gap’s Athleta are all chasing the same customers with better price points.

Here’s the kicker: Lululemon’s trying to prop up earnings by shrinking share count while net income actually contracts. Classic sign of running out of juice.

The Valuation Trap:

Yes, shares now trade at 13.18x forward earnings vs. historical 42x average. Sounds cheap, right? But there’s a reason it’s cheap – the company’s growth engine is sputtering and higher prices might alienate price-conscious consumers who’ve gotten more frugal.

Bottom Line: Good product, mediocre outlook. Stock’s cheaper for a reason. Probably smarter to wait for clearer signs of growth reinvigoration before loading up.