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Valued at a market cap of $31.9 billion, Lululemon Athletica Inc. (LULU) designs, distributes, and retails athletic apparel, footwear, and accessories for both men and women. Based in Vancouver, Canada, the company offers pants, shorts, tops, and jackets designed for healthy lifestyles and athletic pursuits, such as yoga, training, running, and other fitness activities.
Companies worth more than $10 billion are generally described as “large-cap” stocks, and Lululemon Athletica fits this criterion perfectly. The company started as a retailer of yoga pants and other yoga wear and has now expanded to sell athletic wear, lifestyle apparel, accessories, and personal care products through its over 700 stores worldwide and e-commerce platforms.
Shares of LULU are trading 50.6% below their 52-week high of $516.39, which they hit on Dec. 29, 2023. The stock has declined 17.7% over the past three months, lagging behind the Nasdaq Composite’s ($NASX) marginal decline over the same time frame.
Moreover, in the longer term, LULU stock is down 50.1% on a YTD basis, significantly lagging behind NASX’s 16.1% gains. Shares of LULU have declined 34.3% over the past 52 weeks, underperforming NASX’s 26.5% return over the same time frame.
To confirm the bearish trend, LULU has been trading below its 200-day and 50-day moving average since late March.
LULU has been underperforming due to significant softness in its core markets in America, changing consumer preference, and rising competition in the industry, coupled with investor pessimism surrounding its Breeze through leggings, which the company had to pull back because of numerous customer complaints related to its design and discomfort.
The stock increased marginally after its Q2 earnings release on Aug. 29. The company reported earnings of $3.15 per share, which surpassed Wall Street estimates of $2.92 per share. However, its revenue of $2.37 billion missed estimates of $2.4 billion. LULU reduced its full-year guidance and expects earnings to be $13.95 to $14.15 per share, with revenue ranging from $10.38 billion to $10.48 billion.
LULU has also lagged behind its rival, NIKE, Inc. (NKE), which declined 27.7% on a YTD basis and 18.4% over the past 52 weeks.
Despite LULU’s underperformance, analysts remain moderately optimistic about its prospects. The stock has a consensus rating of “Moderate Buy” from the 27 analysts in coverage, and the mean price target of $318.57 suggests a 24.8% premium to its current levels.
On the date of publication, Rashmi Kumari did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
