Lululemon Athletica (NASDAQ:LULU) had a rough ride in 2024, with its stock plunging 24% over the past year, significantly trailing broader market performance. The athletic apparel giant faced mounting challenges, including sluggish U.S. sales, increased competition, and macroeconomic uncertainty. Despite these headwinds, Lululemon managed to surpass Wall Street expectations in Q4 2024, driven by innovation and improved product offerings. As investors look ahead, the focus shifts to the Lululemon stock forecast for 2025—will it bring a turnaround?
Lululemon’s Strategic Growth Plan
Lululemon is banking on its ambitious Power of Three ×2 strategy to double its revenue to $12.5 billion by fiscal 2026, up from $6.25 billion in fiscal 2021. So far, the company has been on track, delivering a compound annual growth rate (CAGR) of 19% in revenue and 23% in adjusted earnings per share (EPS).
For 2024, Lululemon’s net revenue grew by 10% to $10.6 billion, driven by strong performance in international markets. The company posted full-year earnings of $14.64 per share, reflecting a 14.6% year-over-year increase. In Q4, the top line surged 13% to $3.6 billion, with net revenues rising 7% in the Americas and 38% in international regions.
Can Product Innovation and Expansion Drive 2025 Growth?
Lululemon’s ability to maintain customer engagement through product innovation remains one of its biggest strengths. The company continues to refresh core styles and introduce new designs, helping sustain brand loyalty. Additionally, Lululemon is focusing on expanding brand awareness in underpenetrated markets, which could drive higher demand and boost sales.
In 2024, Lululemon’s U.S. segment, which had been a drag on overall performance, showed signs of stabilization. Positive responses to new product launches and encouraging customer acquisition trends suggest that Lululemon is regaining momentum in its home market. Modest growth in U.S. revenue is expected for 2025, potentially easing investor concerns.
2025 Guidance: Modest Growth Expected
While Lululemon’s efforts to refresh its product lineup and expand globally are promising, its 2025 guidance came in below analyst expectations. The company forecasts revenue between $11.15 billion and $11.3 billion, implying a growth rate of just 5% to 7%. This deceleration from previous years’ double-digit growth disappointed investors, causing LULU stock to drop in pre-market trading.
For Q1 2025, Lululemon expects revenue growth of 6% to 7%, with EPS projected between $2.53 and $2.58, compared to $2.54 in the prior-year period. Management cited macroeconomic uncertainties and potential tariff impacts as reasons for the conservative outlook.
Potential Risks: Inflation and Tariffs Loom Large
Macroeconomic factors could further pressure Lululemon’s growth in 2025. Rising inflation is weighing on consumer spending, leading to reduced foot traffic across the retail sector. Additionally, the threat of new tariffs on goods imported from China and Mexico could impact profitability. Currency fluctuations and geopolitical tensions may also add volatility to the company’s financials.
Lululemon’s management acknowledged that these headwinds could result in a 100-basis-point decline in operating margins in 2025. EPS growth is expected to slow to just 2% to 3%, a stark contrast to the robust growth seen in 2024.
Is LULU Stock a Buy in 2025?
Despite its recent struggles, Lululemon remains committed to expansion. In 2025, the company plans to increase its retail footprint by approximately 10%, focusing on international markets and optimization efforts. This expansion could provide an additional growth catalyst and help offset slowing U.S. sales.
However, the macroeconomic environment remains uncertain. Inflation, tariffs, and weakening consumer sentiment could weigh on Lululemon’s profitability and growth prospects. Wall Street analysts maintain a “Moderate Buy” rating on Lululemon, but its forward price-to-earnings (P/E) ratio of 22x appears less attractive given the company’s slowing earnings growth.
The Bottom Line: Mixed Signals for LULU Stock
Lululemon stock forecast for 2025 presents a mixed outlook. While the company’s product innovation, brand expansion, and global growth strategy offer potential upside, macroeconomic headwinds and weaker earnings growth could cap gains. Investors should weigh these factors carefully before deciding whether LULU stock is a buy in 2025.
Featured Image: Freepik
