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Lululemon stock price crashed from its all-time high in 2024 to a low of $225, its lowest level since May 20. LULU stock plunged by over 55% from its highest point in 2023, bringing its market capitalization to $29 billion, down from the all-time high of $68 billion. 

Why Lululemon Athletica stock has crashed

Lululemon Athletica was once one of the top darlings among Wall Street investors as its growth surged. This growth happened as the company gained market share in the athleisure industry in the United States and other markets like China.

LULU’s growth intensified during the COVID-19 pandemic as many people turned to athleisure items during the lockdown. As a result, its annual revenue rose from $3.97 billion in 2020 to $4.4 billion in 2021 and $6.25 billion in 2022. 

Recently, however, this growth momentum has faded for a few reasons. The post-pandemic inflation pushed many consumers to slow their purchases. 

Most importantly, the company’s growth in the athleisure industry attracted copycats, which have gained market share. The most notable of these competitors are Fabletics, Athleta, Nike, Adidas, and Under Armour.

This competition has led to slow revenue growth, especially in core markets like in Canada and the United States. Its annual revenue in 2024 rose by just 9.6% to $10.58 billion. While a 9.6% growth rate is good, it was lower for a company that was used to double-digit acceleration.

Lululemon’s annual growth rate in the previous year was 18%, lower than 29% and 42% in the previous two years. Analysts expect that the slowdown will continue this year. The average estimate among analysts is that its annual revenue will be $11.25 billion, up by 6.25% from last year. 

First quarter earnings download

Lululemon published its financial results recently, and the figures showed that its slowdown continued. Its net revenue rose by 7% in the first quarter to $2.4 billion.

The most important Americas segment’s revenue rose by just 3%, while the Americas segment grew by about 19%. LULU’s closely-watched comparable sales rose by just 1%.

A potential risk the company faces is that it manufactures its products in Asian countries like Vietnam, Cambodia, Sri Lanka, Indonesia, and Bangladesh. 

Donald Trump has implemented sweeping tariffs on goods from these countries that could push Lululemon to hike some prices this year. Higher prices may affect its demand at a time when its growth is slowing.

On the positive side, the ongoing Lululemon stock price crash has made it a bargain. Its forward price-to-earnings ratio has moved to 15, lower than the sector median of 16. The EV-to-EBITDA valuation metric has moved to 9.5, down from the sector average of 10. 

Further, the management has continued to repurchase its stock in the past few years. It repurchased 1.4 million shares in the last quarter at a cost of about $430 million. Its outstanding shares crashed from 125.12 million in 2020 to 114.90 million. 

Lululemon stock price analysis

(Click on image to enlarge)

LULU stock price chart | Source: TradingView

The daily chart shows that the LULU share price has crashed to a low of $226, down from last year’s high of $517. It has formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA).

LULU stock price has retested the key support at $226, its lowest level in August last year. It has formed a double-bottom pattern whose neckline is at $423. A double-top is one of the most bullish reversal patterns. 

Therefore, there is a likelihood that the Lululemon share price will bounce back in the coming weeks. The bullish view will remain as long as it is above the double-bottom point at $226. A break below that level will point to more downside to below $200.

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