Lowered Growth Forecast and Global Expansion Might Change the Case For Investing In Lululemon Athletica (LULU)

• Earlier this week, lululemon athletica revised its full-year revenue growth forecast down to 4%–6% due to increased competition and weaker customer response to new products in North America.
• Despite slowed North American growth, lululemon is expanding internationally, particularly in China and Europe, while management emphasizes opportunistic share buybacks at current lower share price levels.
• We'll examine how management’s reduced growth outlook and international emphasis could impact lululemon's investment narrative and long-term positioning.

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lululemon athletica Investment Narrative Recap

To own lululemon, I think you need to believe in the company's ability to reignite demand in North America while successfully scaling internationally. The reduced revenue outlook makes it clear that weak US growth and increased competition are the most critical near-term issues; for now, these directly impact the biggest risk to lululemon's business, namely the challenge of defending both market share and margins as the brand matures in its core markets.

Of all recent developments, the update on share buybacks stands out: lululemon repurchased 1,527,958 shares for US$349.05 million this quarter, a notably large deployment of capital at lower share prices. This move could provide some support to earnings per share and signals management's confidence, but it is not a substitute for the fundamental catalyst of product and category innovation necessary to restore sales growth.

However, it's important to consider that even as lululemon leans on buybacks and international opportunities, there remains the ongoing risk of deeper declines in North American demand that investors should be aware of...

Read the full narrative on lululemon athletica (it's free!)

lululemon athletica's narrative projects $12.8 billion revenue and $1.9 billion earnings by 2028. This requires 5.4% yearly revenue growth and a $0.1 billion earnings increase from $1.8 billion.

Uncover how lululemon athletica's forecasts yield a $195.84 fair value, a 17% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members provided 57 fair value estimates for Lululemon ranging widely from US$117 to US$409. While views differ, the risk of slowing US demand and falling brand momentum is an important factor shaping many expectations.

Explore 57 other fair value estimates on lululemon athletica - why the stock might be worth 30% less than the current price!

Build Your Own lululemon athletica Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your lululemon athletica research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
• Our free lululemon athletica research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate lululemon athletica's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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