Why Is Wall Street So Bearish on Lululemon? The 1 Key Reason That’s Shaking Investor Confidence
Wall Street's cold shoulder to Lululemon isn't just fashion snobbery—it's a fundamental growth story hitting its limits.
The athleisure giant's expansion playbook looks increasingly stale as consumer spending shifts toward experiences over apparel. Same-store sales growth has plateaued while inventory levels balloon—classic signs of a brand losing its pricing power mojo.
Digital native competitors eat market share daily with better unit economics. DTC upstarts bypass traditional retail entirely while Lululemon still leans heavily on physical footprints with all their associated overhead.
International expansion? More like expensive distraction. China growth can't offset domestic saturation fast enough to move the needle for institutional investors who've seen this movie before.
Meanwhile, the innovation pipeline looks thinner than yoga pants from 2015. New product categories fail to capture the cultural zeitgeist like the original Wunder Unders did.
Wall Street's bearishness ultimately boils down to one brutal truth: premium pricing requires perpetual scarcity, and Lululemon's magic is becoming just another commodity in an oversaturated market. Another case of traditional finance underestimating how fast digital disruptors can unravel legacy moats.
Stiff headwinds
Basically, Lululemon has struggled to cope with two trends -- rising competition, and the end of the COVID-19 pandemic-era boom in exercise products, services, and apparel.
Image source: Getty Images.
With the many closures and lock-ins of that age, people were often stuck for things to do. Two activities that could be conducted at home with relative safety were working out or doing yoga, hence the rise in demand for athleisurewear. This coincided with the rise of Lululemon as a brand; the company had clothes and accessories that not only looked good but were highly practical for such pursuits.
Excessive success leads to determined competition, and rivals inevitably piled into the space. At the same time, the company was maturing, a combination that slowed sales growth notably. From a 42% improvement in fiscal 2021, in the three subsequent years, growth withered to 30%, 19%, and finally 10% in 2024.
To its credit, Lululemon has been able to consistently land in positive territory on the bottom line. But investors are always hungry for meaningful revenue growth, and when that slows, they often bail.
One brand among many
To its credit, Lululemon has remained profitable, as it's continued to -- sensibly, in my view -- focus on that combination of product style, durability, and usefulness.
Yet with those determined competitors crowding its space, the company's wares aren't as distinctive as they used to be. Given that, I'd probably be hesitant to buy the stock for its growth potential until the company figures out how to better distinguish itself in the market again.
