LULU Dropped 18% In A Month. Have You Fully Evaluated The Risk?
Lululemon Athletica (LULU) stock is down 17.6% in 21 trading days. The stock looks attractive, but if you are going to buy it, you got to be in it for the long run. Do not expect quick bucks. Consider the following data:
- A $24 Bil company with $11 Bil in revenue currently trading at $196.51.
- Last 12 month revenue growth of 9.4% and operating margin of 23.4%.
- Has Debt to Equity ratio of 0.1 and Cash to Assets ratio of 0.2
- Currently trading at P/E multiple of 13.1 and P/EBIT multiple of 9.4
- Has returned (median) 8.6% within a year following sharp dips since 2010. See LULU Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for LULU, see Buy or Sell LULU Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and LULU drops another 20-30% to $137.56 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into Lululemon Athletica (LULU) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock has fared worse than the S&P 500 index during various economic downturns.
LULU designs, distributes, and retails athletic apparel and accessories globally through company-operated stores and direct-to-consumer channels across multiple countries.
2022 Inflation Shock
- LULU stock fell 46.1% from a high of $477.91 on 16 November 2021 to $257.51 on 24 May 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 8 December 2023
- Since then, the stock increased to a high of $511.29 on 1 January 2024 , and currently trades at $196.51
| LULU | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -46.1% | -25.4% |
| Time to Full Recovery | 563 days | 464 days |
2020 Covid Pandemic
- LULU stock fell 47.3% from a high of $263.68 on 20 February 2020 to $138.98 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 21 May 2020
| LULU | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -47.3% | -33.9% |
| Time to Full Recovery | 66 days | 148 days |
2018 Correction
- LULU stock fell 31.5% from a high of $69.90 on 10 January 2017 to $47.91 on 30 May 2017 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 7 December 2017
| LULU | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -31.5% | -19.8% |
| Time to Full Recovery | 191 days | 120 days |
2008 Global Financial Crisis
- LULU stock fell 92.3% from a high of $29.00 on 22 October 2007 to $2.25 on 9 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 9 December 2010
| LULU | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -92.3% | -56.8% |
| Time to Full Recovery | 640 days | 1480 days |
Worried that LULU could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.