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Should You Buy or Hold lululemon After a 10% Recovery in a Month?
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lululemon athletica inc. (LULU - Free Report) stock has shown a marked recovery in the past month, with shares rising as much as 9.6%. With this increase, the company’s shares have outpaced the broader Consumer Discretionary sector and the S&P 500’s rallies of 6.7% and 5.4%, respectively. However, the LULU stock is still slightly short of the industry’s growth of 9.9% in the same period.
This Vancouver-based luxury athletic apparel retailer’s shares have shown recovery trends after recording a significant downside since the start of 2024. The LULU stock has lost 46.8% year to date and 26.9% in the past year.
lululemon’s One-Month Stock Performance
Image Source: Zacks Investment Research
Currently trading at $272.48, the stock trades close to its 52-week low of $226.01. This price reflects a 20.6% premium to its 52-week low mark and a 47.2% discount from its 52-week high of $516.39.
LULU trades above its 50-day moving average, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in lululemon’s financial health and prospects.
LULU Stock Trades Above 50-Day Average
Image Source: Zacks Investment Research
What’s Behind lululemon’s Stock Recovery?
LULU has established itself as a premium brand in the sportswear market. This elevated status plays a key role in driving the company’s strong profitability.
Lululemon’s stock is set for growth, fueled by positive trends in international markets, especially Mainland China. The company is optimistic about its potential in Mainland China, where it is expanding its stores and e-commerce platforms. In second-quarter fiscal 2024, international revenues rose 31% year over year, with 37% growth in China and 27% in other global markets.
lululemon remains committed to increasing global brand awareness and is on track to quadruple international revenues by 2026, with the goal of international sales representing half of total revenues.
The men's business is another growth driver for LULU. As part of its Power of Three X2 strategy, lululemon aims to double men's sales from the 2021 level. In second-quarter fiscal 2024, the men's category saw 11% revenue growth, with standout items like the Zeroed In line, Pace Breaker shorts and Zero polo performing well. The company plans to build on this momentum with new styles and greater inventory investments.
Also, the U.S. Federal Reserve’s recent decision to cut interest rates can be a game-changer for stocks in the Consumer Discretionary sector. Companies like lululemon, and its peers, including NIKE Inc. (NKE - Free Report) , Ralph Lauren (RL - Free Report) and Hanesbrands Inc. (HBI - Free Report) , might be the beneficiaries of the rate cut, which may result in improved discretionary spending trends.
Understanding Reasons for LULU Stock’s Slowdown
lululemon has recently faced challenges due to inflation, leading to reduced discretionary spending and struggles in its women’s category, which impacted its Americas business. Rising inflation and higher interest rates have caused consumers to be more selective with discretionary purchases, a significant challenge for luxury brands like lululemon, especially in the United States.
In second-quarter fiscal 2024, revenues in the Americas grew by just 1% year over year, or 2% in constant currency, slowing from 3% growth in first-quarter fiscal 2024 and down from 11% growth in second-quarter fiscal 2023. While the Canada segment saw solid revenue growth of 8% (11% in constant currency), U.S. revenues remained flat, presenting a key concern for the company.
lululemon also experienced a slowdown in the women’s category, led by fewer updates to core and seasonal styles, such as color, print and silhouette changes. This reduced newness limited fresh options for female customers, leading to lower conversion rates.
Despite confidence in its innovation pipeline and long-term recovery prospects, lululemon expects near-term results to be impacted by the lack of new products in the women’s category, as reflected in its fiscal third-quarter outlook.
LULU’s Estimates Trend Down
The Zacks Consensus Estimate for LULU’s fiscal 2024 EPS has declined by a penny in the past seven days. Also, the consensus estimate for fiscal 2025 EPS has declined 0.5% in the past seven days. The downward revisions in earnings estimates indicate analysts’ reduced confidence in the stock.
Image Source: Zacks Investment Research
Is lululemon’s Premium Valuation Good?
lululemon is currently trading at a forward 12-month P/E multiple of 18.5X, exceeding the industry average of 12.68X.
The premium valuation suggests that investors have strong expectations for lululemon’s future performance and growth potential. However, the stock currently seems somewhat overvalued. As a result, investors might be hesitant to buy at these elevated levels and may prefer to wait for a more favorable entry point.
Image Source: Zacks Investment Research
Is LULU’s Stock Recovery a Buy Opportunity?
lululemon’s international business momentum and strong performance in the men’s category present a long-term growth opportunity for the stock. However, the stock remains in a tough spot as it faces challenges from rising inflation, higher interest rates and slowing revenue growth in North America.
Despite a cautious yet positive outlook for the upcoming quarters, lululemon remains an attractive option for long-term investors, supported by strong profitability and global expansion. However, its premium valuation might give some investors pause, indicating a higher level of risk at current price levels. For existing shareholders, holding the stock could be a wise strategy, given its long-term growth potential.
Image: Bigstock
Should You Buy or Hold lululemon After a 10% Recovery in a Month?
lululemon athletica inc. (LULU - Free Report) stock has shown a marked recovery in the past month, with shares rising as much as 9.6%. With this increase, the company’s shares have outpaced the broader Consumer Discretionary sector and the S&P 500’s rallies of 6.7% and 5.4%, respectively. However, the LULU stock is still slightly short of the industry’s growth of 9.9% in the same period.
This Vancouver-based luxury athletic apparel retailer’s shares have shown recovery trends after recording a significant downside since the start of 2024. The LULU stock has lost 46.8% year to date and 26.9% in the past year.
lululemon’s One-Month Stock Performance
Image Source: Zacks Investment Research
Currently trading at $272.48, the stock trades close to its 52-week low of $226.01. This price reflects a 20.6% premium to its 52-week low mark and a 47.2% discount from its 52-week high of $516.39.
LULU trades above its 50-day moving average, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in lululemon’s financial health and prospects.
LULU Stock Trades Above 50-Day Average
Image Source: Zacks Investment Research
What’s Behind lululemon’s Stock Recovery?
LULU has established itself as a premium brand in the sportswear market. This elevated status plays a key role in driving the company’s strong profitability.
Lululemon’s stock is set for growth, fueled by positive trends in international markets, especially Mainland China. The company is optimistic about its potential in Mainland China, where it is expanding its stores and e-commerce platforms. In second-quarter fiscal 2024, international revenues rose 31% year over year, with 37% growth in China and 27% in other global markets.
lululemon remains committed to increasing global brand awareness and is on track to quadruple international revenues by 2026, with the goal of international sales representing half of total revenues.
The men's business is another growth driver for LULU. As part of its Power of Three X2 strategy, lululemon aims to double men's sales from the 2021 level. In second-quarter fiscal 2024, the men's category saw 11% revenue growth, with standout items like the Zeroed In line, Pace Breaker shorts and Zero polo performing well. The company plans to build on this momentum with new styles and greater inventory investments.
Also, the U.S. Federal Reserve’s recent decision to cut interest rates can be a game-changer for stocks in the Consumer Discretionary sector. Companies like lululemon, and its peers, including NIKE Inc. (NKE - Free Report) , Ralph Lauren (RL - Free Report) and Hanesbrands Inc. (HBI - Free Report) , might be the beneficiaries of the rate cut, which may result in improved discretionary spending trends.
Understanding Reasons for LULU Stock’s Slowdown
lululemon has recently faced challenges due to inflation, leading to reduced discretionary spending and struggles in its women’s category, which impacted its Americas business. Rising inflation and higher interest rates have caused consumers to be more selective with discretionary purchases, a significant challenge for luxury brands like lululemon, especially in the United States.
In second-quarter fiscal 2024, revenues in the Americas grew by just 1% year over year, or 2% in constant currency, slowing from 3% growth in first-quarter fiscal 2024 and down from 11% growth in second-quarter fiscal 2023. While the Canada segment saw solid revenue growth of 8% (11% in constant currency), U.S. revenues remained flat, presenting a key concern for the company.
lululemon also experienced a slowdown in the women’s category, led by fewer updates to core and seasonal styles, such as color, print and silhouette changes. This reduced newness limited fresh options for female customers, leading to lower conversion rates.
Despite confidence in its innovation pipeline and long-term recovery prospects, lululemon expects near-term results to be impacted by the lack of new products in the women’s category, as reflected in its fiscal third-quarter outlook.
LULU’s Estimates Trend Down
The Zacks Consensus Estimate for LULU’s fiscal 2024 EPS has declined by a penny in the past seven days. Also, the consensus estimate for fiscal 2025 EPS has declined 0.5% in the past seven days. The downward revisions in earnings estimates indicate analysts’ reduced confidence in the stock.
Image Source: Zacks Investment Research
Is lululemon’s Premium Valuation Good?
lululemon is currently trading at a forward 12-month P/E multiple of 18.5X, exceeding the industry average of 12.68X.
The premium valuation suggests that investors have strong expectations for lululemon’s future performance and growth potential. However, the stock currently seems somewhat overvalued. As a result, investors might be hesitant to buy at these elevated levels and may prefer to wait for a more favorable entry point.
Image Source: Zacks Investment Research
Is LULU’s Stock Recovery a Buy Opportunity?
lululemon’s international business momentum and strong performance in the men’s category present a long-term growth opportunity for the stock. However, the stock remains in a tough spot as it faces challenges from rising inflation, higher interest rates and slowing revenue growth in North America.
Despite a cautious yet positive outlook for the upcoming quarters, lululemon remains an attractive option for long-term investors, supported by strong profitability and global expansion. However, its premium valuation might give some investors pause, indicating a higher level of risk at current price levels. For existing shareholders, holding the stock could be a wise strategy, given its long-term growth potential.
lululemon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.