lululemon athletica inc. LULU has seen its shares decline 4% since it announced increases in its revenue and earnings guidance for the fourth quarter of fiscal 2024 on Jan. 13, 2025, driven by stronger-than-anticipated demand during the holiday season. The company benefited from positive customer response for its merchandise during the holiday selling period.
While LULU’s shares show a decline after strong holiday results, is it a reason to worry about the stock?
lululemon’s 3-Month Performance Reflects Strength
In the past three months, lululemon shares have rallied 28%, outperforming the broader industry’s growth of 16.3% and the Consumer Discretionary sector’s rise of 7.6%. The company also outperformed the S&P 500’s rally of 5.1% in the same period.
LULU Stock’s 3-Month Return
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lululemon’s current share price of $382.82 reflects a 22.1% discount from its recent 52-week high mark of $491.30. Also, the stock reflects a 69.4% premium from its 52-week low of $226.01.
LULU trades above its 50 and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in lululemon’s financial health and prospects.
LULU expects revenues for fourth-quarter fiscal 2024 to grow 11-12%, reaching $3.56-$3.58 billion. The revised guidance marks an increase from the previous forecast of $3.48-$3.51 billion. Adjusting for the additional 53rd week in fiscal 2024, the company expects organic revenue growth of 6-7% for the fiscal fourth quarter.
The leading athleisure retailer also raised its profit outlook, projecting fiscal fourth-quarter earnings per share between $5.81 and $5.85, up from the previously stated $5.56 to $5.64.
lululemon anticipates a 30 basis points (bps) increase in the gross margin from that reported in the fourth quarter of fiscal 2023. This is a notable improvement from the prior guidance, which projected a 20-30 bps decrease in the gross margin. The company expects a deleverage in selling, general and administrative (SG&A) expenses of 80-90 bps, an improvement from the earlier mentioned 90-100 bps increase.
lululemon’s Earnings Estimates Indicate Uptrend
The Zacks Consensus Estimate for LULU’s fiscal 2024 and 2025 EPS has increased 0.4% and 0.5%, respectively, in the past seven days. The upward revision in earnings estimates indicates a bullish outlook for the stock.
The Zacks Consensus Estimate for lululemon’s fourth-quarter fiscal 2024 EPS rose 0.9% in the past seven days, highlighting optimism over the company’s near-term prospects.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
For fiscal 2024, the Zacks Consensus Estimate for LULU’s sales and EPS implies 9.6% and 12.3% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and EPS indicates 7.4% and 6.7% year-over-year increases, respectively.
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LULU’s Long-Term Potential
lululemon is showcasing resilience and global growth, driven by the progress on its Power of Three X2 growth strategy. This five-year plan focuses on three key growth drivers — product innovation, guest experience and market expansion. The strategy aims to quadruple international net revenues from the 2021 reported levels, and double digital and menswear sales.
As part of the Power of Three X2 growth plan, LULU estimates net revenues of $12.5 billion by 2026, implying significant growth from the 2021 reported figure of $6.25 billion. Additionally, lululemon is on track to expand the men’s category, doubling its sales from that reported in 2021.
LULU’s strong brand positioning continues to be a key factor driving its success, both domestically and internationally. The company's commitment to offering high-performance, premium athletic apparel sets it apart in a competitive market. lululemon’s focus on innovation, with frequent updates to product lines and seasonal newness, ensures that its offerings remain relevant and appealing to its growing customer base.
The company’s successful global expansion is another critical factor fueling its growth. With a well-executed strategy in international markets, particularly in regions such as China, lululemon has seen strong acceptance of its brand and is effectively connecting with customers through localized marketing and product offerings. This international push is supported by lululemon’s ability to optimize store locations and enhance the customer shopping experience.
How to Strategize Your LULU Stock Investment?
lululemon’s strong holiday results reveal a resilient performance and robust outlook. The company is well-positioned for long-term growth, supported by strong momentum in the international business and initiatives like the Power of Three X2 growth plan.
LULU’s upbeat fiscal 2024 outlook and positive estimate revisions inspire investor optimism. lululemon remains an attractive investment for long-term investors. The company currently has a Zacks Rank #2 (Buy).
Three Other Promising Picks
We have highlighted three other top-ranked stocks in the broader sector, namely GIII Apparel Group GIII, Under Armour UAA and Ralph Lauren RL.
GIII Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s fiscal 2024 sales and earnings indicates growth of 1.7% and 3%, respectively, from the year-ago reported figures. GIII has a trailing four-quarter earnings surprise of 113.4%, on average.
Under Armour is one of the leading designers, marketers and distributors of authentic athletic footwear, apparel and accessories for a wide variety of sports and fitness activities in the United States and internationally. It sports a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for UAA’s fiscal 2024 sales and earnings indicates declines of 10.6% and 50%, respectively, from the year-ago reported figures. Under Armour delivered an earnings surprise of 75.1% in the trailing four quarters, on average.
Ralph Lauren is a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia, and internationally. It currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2025 sales and earnings indicates growth of 3.6% and 14%, respectively, from the year-ago quarter’s reported numbers. RL has a trailing four-quarter earnings surprise of 9.1%, on average.
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