From Yahoo Finance: 2025-06-17 20:58:00

Lululemon Athletica (LULU) has lost $20.4 billion in market value due to rising competition, inventory challenges, and market saturation. Despite struggles, Lululemon maintains high margins and returns on capital, making it a standout in the apparel sector.

Lululemon’s stock has plummeted 41% from its peak, hitting its lowest price in a decade. Earnings report on June 5 led to a double-digit drop as the company slightly beat estimates, but reduced full-year EPS guidance, citing competitive pressure and product missteps.

Inventory challenges and product assortment issues have contributed to Lululemon’s recent struggles. The company has faced design team changes, leading to inventory build-up and potential markdowns. These challenges impact sales in mature markets like the U.S. and Canada immediately.

Structural headwinds like increasing competition in athleisure and market saturation in key regions have hindered Lululemon’s performance. Despite these challenges, Lululemon maintains high profitability with margins exceeding industry peers, providing flexibility for growth.

Lululemon’s struggles are not cyclical but structural, including competition in the athleisure space and issues with product execution and inventory management. Despite these hurdles, Lululemon continues to generate value creation that exceeds its capital cost, giving reason for optimism.

Lululemon’s stock is currently undervalued, trading at its lowest level in a decade. Despite more cautious forecasts, the company shows potential for long-term growth, with an estimated 30% upside from the current share price over the next twelve months.

Analysts’ consensus on Lululemon leans moderately bullish, with a target price of $310.44, indicating a 30% upside from the current price. To restore investor confidence, Lululemon must address structural challenges and maintain revenue growth, offering a compelling opportunity for patient, long-term investors.

Read more: Why Lululemon Athletica (LULU) Bulls Shouldn’t Throw in the Towel Just Yet