Lululemon Stock Slumped in 2024. Will 2025 Bring a Comeback?

Lululemon Athletica (LULU) had a tough run in 2024, with its stock sliding 24% over the past 52 weeks, significantly underperforming the broader market. The athletic apparel giant faced a series of challenges, including product-related headwinds, weaker U.S. sales, and increased competition. While these factors created uncertainty around Lululemon’s long-term growth, the company still surpassed Wall Street expectations in the fourth quarter (Q4), driven by its focus on innovation and product refreshes.

Can Lululemon’s Growth Plan Turn the Tide?

Despite recent struggles, Lululemon’s ambitious Power of Three ×2 growth strategy aims to double its top line to $12.5 billion by fiscal 2026 from $6.25 billion in fiscal 2021. So far, the company has been ahead of its targets, growing revenue at a CAGR of 19% and boosting adjusted operating margins. Lululemon’s adjusted earnings per share (EPS) grew at a CAGR of 23% during this period, justifying its valuation.

As for 2024, Lululemon’s net revenue increased by 10% to $10.6 billion, led by solid momentum in its international business. It reported full-year earnings of $14.64 per share, up 14.6% year-over-year.

In Q4, Lululemon’s top line increased 13% to $3.6 billion, with net revenues increasing by 7% and 38% in the Americas and the international markets. Lululemon’s margins expanded, and it repurchased shares worth $332.2 million.

One of Lululemon's key drivers is its continued focus on product innovation. The company regularly updates its core styles and introduces fresh designs, helping maintain customer engagement and loyalty. Another priority is expanding brand awareness, which remains relatively low in many markets where it operates. A stronger brand presence could drive higher demand and bolster sales growth.

Lululemon’s U.S. business, which was a significant drag on financials in 2024, showed signs of stabilization toward the year’s end. Consumers responded positively to new product offerings, and strong customer acquisition and retention trends suggest that Lululemon is on the right track. The company expects modest growth in U.S. revenue for 2025, which could help ease investor concerns.

The Outlook for 2025: Growth or More Struggles?

While Lululemon’s efforts to refresh its product lineup and expand brand awareness are promising, its 2025 guidance fell short of analyst expectations. The company projects revenue between $11.15 billion and $11.3 billion, reflecting a growth rate of 5% to 7%. This reflects a deceleration compared to previous years. This lower-than-expected outlook sent the stock tumbling in pre-market trading.

For the first quarter of fiscal 2025, Lululemon’s top line is projected to increase by 6%-7%, while its bottom line is expected to be in the range of $2.53 to $2.58 compared to $2.54 in the prior-year period.

The company’s management noted that macroeconomic headwinds could further pressure Lululemon’s growth. Inflationary concerns have weighed on consumer spending, leading to slower foot traffic across the retail sector. Additionally, currency fluctuations and potential tariffs on goods from China and Mexico could impact profitability.

The Bottom Line: Should Investors Buy LULU Stock?

Despite its recent struggles, Lululemon remains focused on expansion. In 2025, the company plans to increase its retail footprint by approximately 10% through new store openings and optimization efforts. Expanding into new international markets could provide an additional growth catalyst.

However, macroeconomic uncertainty and geopolitical risks could dampen Lululemon’s upside potential. The company expects its operating margin to decline by 100 basis points in 2025, and EPS growth is projected to slow to just 2%-3%, a stark contrast to its double-digit growth in 2024.

Wall Street maintains a “Moderate Buy” rating on Lululemon, but its forward price-earnings (P/E) ratio of 22x fails to appeal, given its slowing earnings growth. While new product launches and store expansions offer promise, macroeconomic headwinds could make 2025 another challenging year for the company.