r/investing Mar 29, 06:35 PM
The Case for Lululemon - A Deep Dive Hey, have gotten some good feedback on a few previous posts, figured I would post this as well. Also, it is written for substack so charts/pictures are mostly missing, sorry :(
Waiting for the person who comes every time and accuses me of using AI.
Enjoy!
Most consumer brands are either focused on luxury or utility. Ferrari or Louis Vuitton are the former. Costco and McDonalds the latter. Lululemon doesn’t exactly fit either niche and maybe for that reason the stock is down a staggering 70% from its all time highs in December of 2023. Year-To-Date the stock has also performed extremely poorly down another 28% in the first few months of 2026. The stock is now at its lowest price this decade and seems poised to continue its negative trajectory. The sentiment around the company is negative, US sales are down and the current war with Iran could weigh on spending on luxury brands. However, there are positive signs as well, despite slowing down from its rapid revenue growth in the last few years, Lululemon’s revenue just hit an all time high and is up 5% from the previous year. The company is buying back shares rapidly and international revenue grew by 17% in 2025. While critics argue that the stock may be a value trap, it could also be an oversold company in a market that doesn’t understand the power of its brand.
What is Lululemon?
Lululemon is a high quality clothing brand that originally sold yoga clothing. Over the last two decades, they have expanded into every day clothing, shoes, accessories and personal care products. Lululemon prides itself in being more comfortable and durable than other products and has generated a cult like following. While $128 seems like a lot for a pair of pants, Lululemon argues that a pair of pants that will last for ten years are well worth the investment and investing in your wardrobe is better than buying low quality products that will need to be replaced often. Critics argue that the cost is not worth the product and point to competitors with significantly cheaper prices for similar products.
For years the company expanded rapidly. As the company grew, their aspirations to speed up growth grew with the company and all of a sudden the company started having missteps. Problems with the brand like “pantsgate”, where Lululemon put out and then pulled back see through leggings began coming up, something the former founder Chip Wilson called “a new low.” Chip Wilson who stepped away from leadership but remained the largest shareholder was very public in his criticism of the company for focusing on revenues as opposed to the product, something that is antithetical to what he believed to be the brands ethos. Days later in January of 2026, CEO Calvin McDonald who was with the company since 2018 stepped down. The departure was seen as sudden and there has not been a clear replacement yet. This has contributed to the uncertainty around the company and its vague future and the stock has responded with a sharp 30% declin