Lululemon Faces Slowing Growth Amidst Market Challenges

Recent reports highlight Lululemon's 17.5% EPS growth contrasting with slowed revenue and earnings forecasts, raising concerns among investors. The company's challenges with product launches and intensified competition could further impact its stock performance negatively.

Date: 13-09-2024

AI Rating: 5

Lululemon (NASDAQ: LULU) has shown earnings per share (EPS) growth of 17.5% year over year, which translates to $3.15 per diluted share. However, this positive performance is overshadowed by concerns regarding a slower overall growth trajectory. The company anticipates net revenue for 2024 to be in the range of $10.38 billion to $10.48 billion, marking an increase of only 8.9% compared to last year's revenue of $9.62 billion. This forecast represents the slowest top-line growth for the company over the past five years.

Furthermore, projected diluted earnings per share for 2024 are estimated to be between $13.95 and $14.95, suggesting a full-year growth of around 22.5%. Despite this sounding positive, it is significantly less exciting when compared to the previous year's massive 82% increase in earnings growth.

Additional challenges include a recent product failure with their 'Breezethrough' leggings, which were withdrawn due to customer dissatisfaction with sizing and fit. This unanswered flaw in product innovation raises further concerns about Lululemon's ability to attract consumers against a backdrop of intensive competition from brands like Nike, Adidas, and Under Armour, all struggling with their market performance. The crowded athleisure market may not favor premium-priced products, especially as consumer sentiment weakens.

Given these factors, investor sentiment around Lululemon could turn cautious. Year-to-date stock performance has already decreased by 50%, and without notable positive catalysts emerging soon, the outlook remains stagnated. Investors may want to reconsider their engagement with Lululemon as the company navigates both internal and external hurdles in the upcoming quarters.

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