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Although yoga originated in India, Lululemon Athletica is credited with making yoga wear a global industry worth over $10 billion.
The Canadian brand, which sold tops and leggings at prices that competitors could hardly match, has become synonymous with high-end sportswear over the last ten years. Its stock increased more than sevenfold between 2013 and 2023, rewarding early investors and solidifying its status as a market darling.
But since then, that surge has drastically reversed.
From its peak, the stock has dropped about 65%, including an 18% slide after the latest quarterly update. Year-to-date it is down 54%, and over the past twelve months it has shed 35%.
For a company once viewed as invincible in athleisure, such a correction is forcing investors to ask if sentiment has turned permanently or if the current slump is the kind of reset that often precedes the next rally.
The business itself still looks solid, to be honest.
In the second quarter of FY25, revenue rose 7% year-over-year to $2.5 billion, driven by a 22% jump in international sales, while net profit held steady at $371 million. The company now operates 784 stores across the globe, with double-digit growth being achieved in categories like menswear and accessories.
The irony is that a company that is still expanding internationally and making a healthy profit is trading as though its future has already dimmed.
For investors watching global consumer names, the real question is whether Lululemon’s recent fall is a warning sign of deeper weakness or a rare chance to buy a global icon at a discount.
Business Dynamics: Growth Abroad, Weakness at Home
Lululemon’s quarterly update showed a company still expanding, but not evenly. The biggest concern lies in North America, where sales were essentially flat in the U.S. and grew just 1% across the region.
Comparable sales in the Americas actually fell 4% on a reported basis, pointing to weaker store traffic and lower conversion. For a brand that once relied on a loyal U.S. base to fuel growth, this slowdown explains much of the market’s anxiety.
International markets, however, told a very different story.
Revenue outside the Americas grew 22% in the quarter, with China up 25% and the “Rest of World” segment rising 19%. The company added 14 net new stores globally, bringing its total to 784, including fresh openings in China, Europe, and Mexico.
Digital revenue also rose 9% and now accounts for 39% of total sales, while the physical store network contributed a more modest 3% growth.
Margins showed the pressure of this mixed picture. Gross margin slipped 110 basis points to 58.5% of sales, down from 59.6% a year ago. Management cited higher markdowns, seasonal clearance, and increased import tariffs as key drivers of the decline. Operating margin fell to 20.7% from 22.8% in the same quarter last year.
Still, net income came in at $371 million, down slightly from $393 million a year earlier, translating into earnings per share of $3.10 versus $3.15.
One standout was product diversification.
Women’s apparel revenue rose 5%, men’s apparel grew 6%, and accessories surged 15%.
Lululemon is still growing beyond yoga pants into other areas like golf, tennis and shoes, which it sees as long-term growth engines. But demand for casual and lounge wear, which used to be a fast-growing market, has slowed down, so management has to change the mix of products it sells.
Inventories rose 21% year-on-year to $1.7 billion, a build that was partly intentional to stock new stores, but also a sign that clearing older assortments will remain a focus.
Execution and Management Thinking
Behind the numbers, management has been candid about what is and is not working.
Chief executive Calvin McDonald admitted that the U.S. business has suffered from product fatigue, especially in lounge and social wear, where customers have grown tired of older franchises like Scuba and Softstreme.
The company’s recent product diagnostic concluded that life cycles for key styles have been allowed to run too long, leaving the brand predictable in categories that thrive on freshness.
To fix this, Lululemon is deliberately resetting its playbook.
The company plans to lift the share of new styles in its assortment from 23% today to about 35% by spring 2026. Fresh casual lines such as Daydrift, BeCalm, and upcoming launches like Loungeful and Big Cozy are meant to inject energy back into the lifestyle side of the business. At the same time, performance apparel remains a core differentiator that is sales in yoga, run, train, golf, and tennis categories all grew, even as the overall market for premium activewear contracted.
Management believes leaning into technical innovation, while revamping casual wear with faster design cycles, can strike the right balance between reliability and novelty.
Execution also means speeding up the supply chain.
Lululemon is working with vendors to shorten lead times, pre-buy certain fabrics, and improve its ability to “chase” into popular products mid-season. A new Chief AI and Technology Officer has been tasked with using technology to accelerate design and improve personalization across the guest experience.
Alongside this, the company continues to expand its distribution footprint, spending nearly $178 million in Q2 on store openings, logistics, and IT. These investments depress near-term margins but are intended to keep growth scalable as the store base approaches 800.
Management has also made it clear that they won’t give up brand equity just to get short-term numbers.
Unlike many apparel players, Lululemon resists heavy discounting and promotions. Even with higher tariffs and cost inflation, the company says it will rely on selective pricing adjustments, vendor negotiations, and internal efficiencies rather than broad markdowns that could damage its premium positioning. As McDonald put it, the priority is to “protect the long-term brand” even if that means enduring some margin compression in the short run.
Valuation and Investor Sentiment
If the business is still growing and profitable, why has the market turned so harsh?
The answer lies in expectations.
For much of the past decade, Lululemon was priced like a high-growth consumer-tech stock rather than a conventional retailer. Investors were willing to pay 25 to 30 times earnings because revenue growth consistently topped 15% and margins were industry-leading. Now, with management guiding for just 4–6% revenue growth this year, the market has quickly cut those premiums.
The stock has collapsed 54% in 2025 alone, bringing its one-year fall to 35%. From its highs, the correction now stands at about 65%.
For comparison, the S&P 500 consumer discretionary index is up modestly over the same period, making Lululemon’s decline even more striking. The immediate trigger was the Q2 update: despite $2.5 billion in revenue and $371 million in profit, the company trimmed its full-year outlook, citing weaker U.S. trends and the hit from higher tariffs. Investors punished the stock with an 18% single-day fall, underscoring how fragile sentiment has become.
On valuation terms, the collapse has brought Lululemon back to levels not seen in years.
At roughly 13 times forward earnings, the stock is now closer to traditional retailers than to premium growth names. The company still has over $1.1 billion in cash, no long-term debt, and is returning capital through buybacks, it repurchased 1.1 million shares in Q2 at an average price of $247.
For long-term investors, those numbers suggest a company with financial strength trading at a valuation that already bakes in a slowdown.
This gap between perception and fundamentals is where FOMO creeps in. A brand with global growth, expanding categories, and strong balance sheet is rarely available at a steep discount. The market may be bracing for slower U.S. sales and thinner margins, but if execution improves and international expansion continues at double-digit rates, today’s pessimism could look overdone. For retail investors watching from India, the paradox is tempting: the business is healthier than the stock chart suggests.
Finally Making Sense
When a stock rises seven-fold over a decade and then loses nearly two-thirds of its value in less than two years, investors are left trying to separate hype from reality. Lululemon’s latest results offer some clarity. The U.S. market that once powered its ascent is now slowing, margins are under pressure from tariffs and markdowns, and product fatigue in casual wear has dented growth. At the same time, the brand continues to expand globally, international sales are growing at 20% plus, and profits remain steady with a strong balance sheet to support future investment.
For investors, the contradiction is the opportunity. The market has already punished the stock, dragging valuation down to levels that no longer assume perfection. If management executes on product refreshes, speeds up supply chains, and sustains international momentum, the business could grow into its premium status once more. If not, the caution embedded in today’s price may be justified.
Either way, the numbers now tell a more balanced story: a profitable brand with global growth potential that is no longer priced for flawless execution. For Indian investors looking at global consumer names, Lululemon’s stock slump finally makes sense — it reflects both the risks of maturity and the possibility of a rare entry point into a company still stretching for its next chapter of growth.
Image Source – Gemini
