A COVID-Darling Retailer Has Never Been Cheaper
One of the most popular brands during COVID has had a rough time.
Its stock price is down almost 80% from its peak in 2024!
The company is Lululemon Athletica Inc. (ticker: LULU), a popular athletic apparel retailer.
The stock price chart is pretty wild.
When people were working out at home during COVID, the demand for Lululemon’s clothing exploded.
Plus, athleisure (everyday athletic apparel) became very popular, even outside of working out.
Over the past decade, Lululemon’s revenue and earnings have averaged over 20% growth each year.
However, Lululemon’s shine has faded, and it has fallen hard.
First, Lululemon’s price-to-earnings (P/E) ratio was ridiculous.
When its stock price peaked in 2024, its P/E ratio was over 60, which was 4x higher than the industry average.
So, part of Lululemon’s stock price drop was because the stock was incredibly overvalued.
Second, Lululemon’s growth has reversed course.
Lululemon reported earnings last week, and they weren’t good.
Revenue for the 2nd quarter fell 4% compared to the same quarter last year.
Management also lowered its revenue guidance for the rest of 2026 to $10.4 billion, which is 6% lower than revenue in 2025.
After earnings were released, Lululemon’s stock price crashed 18%!
The last time Lululemon’s stock price was around $100 was back in 2018.
Why is Lululemon struggling so much?
Trends are shifting away from athleisure and more toward baggier clothing.
Sales for Lululemon’s leggings, one of its flagship products, dropped 20% last quarter.
Earnings are also expected to fall around 25% in 2026 compared to last year.
It’s been a disaster, hence the recent crash in its stock price.
However, Lululemon’s P/E ratio swung too violently in the other direction.
Using 2026 expected earnings, Lululemon’s P/E ratio is only 10.6x and near an all-time low for the company.
The average P/E ratio for retailers is around 16x, so Lululemon is incredibly cheap right now compared to its peers.
And despite the recent struggles, Lululemon is still incredibly profitable.
Its profit margin last quarter was over 13%, which is 6x higher than the retail average.
If you’re still not convinced, then maybe a famous investor will sway you.
Michael Burry, most famous for predicting the subprime-lending crisis in 2008, is very bullish on Lululemon.
He even called the stock a “fat pitch.”
Lululemon is Burry’s largest position, and he plans on adding more shares following the recent crash.
Right now, people are laughing at Burry since he’s down over 50% on Lululemon.
But Lululemon’s low P/E ratio is very hard to ignore, and now is a great time to buy up some shares in the struggling retailer.
Are there any spiraling stocks you’re looking to buy?
Coach Parker
Category: Stocks
