Are You Sure You Understand Lululemon Stock’s Risk?
Lululemon Athletica (LULU) stock has lost about 47% over the past twelve months, while the S&P 500 returned about 16%. And on September 3, management lowered its revenue and earnings forecasts for the year. The stock now trades at 7.4 times earnings, against 21.5 for the S&P 500, and you might assume it has little left to lose. So how has Lululemon stock behaved when the whole market fell?
Lululemon Stock Has Lost Far More Than The Index
Lululemon stock fell 38.8% on average in the nine market shocks Trefis tracks since 2008, against 19.2% for the S&P 500. Its largest fall among those shocks came in the 2008-2009 Global Financial Crisis, when it lost 91% while the index lost 53%.
In the median case, the stock took 4.4 months from its low to get back to its old high. But three recoveries took more than a year. The stock needed 13.8 months after the 2022 Inflation Shock and 20.4 months after the financial crisis. It needed 29 months after the 2013 Taper Tantrum. In that episode, Lululemon stock lost 41% while the S&P 500 barely moved, so that fall was specific to Lululemon and not a market-wide drop.
Lululemon’s Sales Are Now Falling, And Its Margin Has Narrowed
Lululemon is still profitable, but its sales have started to shrink. Revenue grew 1.7% over the past twelve months to $11.1 billion. It had grown 9.2% in the twelve months before, and in the latest quarter it was 4.3% lower than a year earlier.
Lululemon’s operating margin was 17.8% over the past twelve months, down from 23% a year ago. Its debt, though, is not unusual: it equals 20.4% of its market value, about the same as the 20.8% for the S&P 500.
Management Expects Lululemon’s Profit To Fall In Fiscal 2026
You cannot tell from a low multiple where earnings are heading, and Lululemon’s management expects them to fall. On its September 3 call, management guided fiscal 2026 earnings to $9.48 to $9.73 a share, against $13.26 in fiscal 2025. That range already includes $0.86 a share from tariff refunds booked in the second quarter. Management also expects fiscal 2026 revenue to come in 5% to 7% below fiscal 2025.
Management said leggings sales fell about 20% in the fiscal second quarter, and that leggings trends so far in fiscal 2026 have been below its expectations. Its forecast also assumes that sales in North America weaken further in the second half of fiscal 2026.
For fiscal Q3 2026, management expects an operating margin of about 6.5%, against 17% in fiscal Q3 2025. An operating margin below that guide in the fiscal Q3 2026 report would show Lululemon’s profit shrinking faster than management expected on September 3.
How To Act On LULU?
Now you know LULU better. And that’s our purpose: to make you informed before you invest your money. However, making a bet on a single stock carries its own risks.
There is a smarter choice. Since its inception, the Trefis High Quality (HQ) Portfolio has beaten the benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking.
If you’d rather act on LULU itself:
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