The S&P 500’s seemingly continued to thrive throughout 2025, reaching new all-time highs. Sadly, the same can’t be said for Lululemon Athletica (NASDAQ:LULU).
The premium sports apparel brand has encountered numerous challenges throughout 2025, including slower growth, softening demand, tariff disruptions, and rising competition — all simultaneously. And consequently, the stock’s down a painful 60% since February – its lowest level since 2019.
Yet, with the once-loved growth stock now trading for a price-to-earnings ratio of just 11.5, could it now secretly be a terrific buying opportunity?
Comeback potential
Despite all the disruptive forces surrounding this business, there’s cause for some optimism. The company’s international expansion into markets like China appears to be going well. And with its brand seemingly resonating with non-US customers, it opens the door to a much broader sales opportunity versus the more saturated North American market.
At the same time, Lululemon has several upcoming product launches that might help reinvigorate demand from its core customer base – something that may also be supported by its new partnership with American Express. The latter involves offering co-branded credit cards and exclusive offers to help drive repeat purchases with typically more affluent consumers.
There’s no denying a successful rebound will require good execution – something often far easier said than done. But at today’s valuation, that might be a risk worth taking. Of course, there are other factors to consider as well.
What could go wrong?
The landscape for this apparel brand has always been competitive. But the heat seems to be ramping up.
The group’s product reputation largely revolves around yoga and athleisure clothing, with younger women making up most of its customer base. Yet it seems rival brands like Alo and Vuori are starting to encroach on its territory with directly competing products that are seemingly resonating well with Lululemon’s core audience.
Needless to say, losing engagement from customers to alternative brands is a serious problem. And while management’s attempting to address this through product innovation, it’s too soon to tell whether this strategy’s working.
The bottom line
If management’s able to right the ship and get customers excited for its products once again, the recovery potential of this S&P 500 stock could be substantial. This is especially true considering how cheaply the shares are seemingly trading compared to their historical price levels.
However, delivering such a turnaround is no easy feat. And we’ve already seen this first-hand with other once-thriving sports/fashion brands such as Under Armour.
It goes to show that succeeding in this space is exceptionally difficult. And while I remain cautiously optimistic about the future of Lululemon shares, I’m not willing to put any money behind it right now. That’s why, despite the cheap valuation, I’m not rushing to buy shares today.
But it’s definitely a business worth watching closely moving forward.
