Lululemon Stock Plummets 57% in 2025, But Analysts See Light at End of Tunnel

After soaring to nearly $414 a share at the start of 2025, Lululemon Athletica Inc. now trades at just $177.50—down 57% in less than a year. The collapse isn’t just a blip; it’s the worst performance by any major apparel brand in the S&P 500 this year. Investors are spooked by shrinking margins, stagnant U.S. sales, and a new wave of trade costs. But here’s the thing: some of the smartest money on Wall Street isn’t running. They’re buying. And that’s where the real story begins.

Why the Sell-Off? It’s Not Just Fashion

Lululemon’s second quarter 2025 results told a troubling tale. Comparable store sales in the Americas dropped 4%. Revenue growth? A meager 1% year-over-year. The athleisure boom that once made this brand a darling of retail investors has cooled—especially among middle-class shoppers who are cutting back. Meanwhile, the company’s net margin slipped to 16.38% from 17.1% last year, and EPS fell to $3.10 from $3.15 in the same period a year ago. It’s not a crash, but it’s not growth either.

The real kicker? Tariffs. The U.S. government’s removal of the de minimis exemption—once allowing packages under $800 to enter duty-free—hit Lululemon like a sledgehammer. The company now expects a 300-basis-point gross margin decline in fiscal 2025, mostly due to $240 million in new tariff costs. That’s not a rounding error. That’s enough to erase the profit from nearly 1.5 million pairs of yoga pants.

International Growth: The Bright Spot

While North America stalls, Lululemon’s international business is firing on all cylinders. In the same quarter, international comparable store sales jumped 15%, with China leading the charge at 17% growth. Revenue there soared 25%. Mexico? Eighteen new stores opened in the past year alone. The company now operates roughly 650 locations globally, with international stores making up nearly 20% of its footprint. This isn’t just diversification—it’s survival.

"We’re refreshing our product engine," CEO Calvin McDonald said during the earnings call. "We’re accelerating design cycles and rebalancing our assortment to revive categories that have lost relevance." Translation: they’re ditching some of the overhyped, overpriced pieces that turned off customers and doubling down on core, high-quality basics.

Analysts Are Betting Against the Crowd

Despite the gloom, Janine Stichter, analyst at BTIG, reaffirmed a "Buy" rating on November 28, 2025, with a $303 price target. That’s over 70% upside from current levels. Why? Because she sees a company trading at 11.3x earnings—the lowest P/E in over a decade—while still generating $1.16 billion in free cash flow annually. Her model suggests Lululemon could hit $1.6 billion in free cash flow by 2030.

Even more telling? Raymond James Financial Inc. increased its stake by 10.7% in Q2 2025, adding over 10,000 shares. Institutional investors now own 85.2% of the company. When big money moves in while the public is fleeing, it’s rarely a coincidence.

What’s Next? Earnings, Tariffs, and a New Product Cycle

Lululemon is set to report Q3 2026 earnings on December 4, 2025. Analysts expect $2.22 EPS and $2.4835 billion in revenue—slightly below last year’s $3.10 EPS, but a sign the worst of the margin erosion may be behind them. The company’s fiscal 2025 guidance of $12.770–$12.970 EPS still holds, even as Zacks lowered its EPS forecast by a penny in the past week.

The Zacks Consensus expects just 0.7% EPS growth in fiscal 2026, but 5.1% revenue growth. That mismatch suggests investors are pricing in a long-term recovery, not a quick rebound. The market’s treating Lululemon like a mature retailer—not a growth stock. But if the product refresh works, and international momentum continues, that perception could flip fast.

The Bigger Picture: When a Brand Outgrows Its Hype

Founded in 1998 by Chip Wilson in Vancouver, British Columbia, Lululemon once defined a lifestyle. Its leggings weren’t just clothing—they were status symbols. But as competitors flooded the market with cheaper alternatives, and as consumers grew weary of premium pricing without premium innovation, the magic faded.

The company’s challenge now isn’t just about tariffs or sales trends. It’s about redefining its identity. Can it become the Patagonia of activewear—trusted for quality, not just aesthetics? Can it turn its international expansion into a sustainable engine? And can it stop chasing trends and start building timeless products?

The answer might be in the numbers. Lululemon’s return on equity remains a stellar 42.05%. Its balance sheet is clean. It still has pricing power in markets like China. And its store footprint, while growing, isn’t bloated.

This isn’t a company in decline. It’s a company in transition. And transitions are messy.