lululemon(US:LULU) ZACKS·2025-07-23 16:06Core Viewpoint - lululemon athletica inc. (LULU) is experiencing a downtrend due to expectations of higher expenses and uncertainty from increased tariffs on imports from China and Mexico, leading to a subdued outlook for fiscal 2025 [1][15] Financial Performance - LULU's forward 12-month price-to-earnings (P/E) multiple is 14.88X, which is a premium compared to the Zacks Textile – Apparel industry's average of 11.35X, indicating the stock is expensive from a valuation perspective [2][4] - The price-to-sales (P/S) ratio for lululemon is 2.32X, which is below the industry's 1.6X, contributing to investor expectations [2] - In the past three months, LULU shares have declined by 17.3%, underperforming the broader industry decline of 0.7% and the Zacks Consumer Discretionary sector's growth of 16.8% [5][7] Market Dynamics - The current share price of LULU is $223.93, which is 47.1% below its 52-week high of $423.32 and 1.8% above its 52-week low of $219.97, indicating bearish sentiment as it trades below its 50 and 200-day moving averages [9][10] - The decline in stock price is attributed to investor concerns over multiple headwinds, including softness in the U.S. market and cautious consumer behavior, which has impacted sales growth [11][15] Operational Challenges - LULU is facing margin pressures due to increased tariffs and higher import costs, which are affecting near-term profitability [7][14] - The company has lowered its EPS guidance for the second quarter to $2.85-$2.90, with an expected decline in operating margin of nearly 380 basis points [16] - Despite reaffirming fiscal 2025 revenue guidance, the company has seen downward revisions in EPS estimates for fiscal 2025 and 2026, indicating a loss of confidence in growth potential [17][18] Investment Sentiment - The combination of high valuation and subdued fundamentals suggests that investors may remain cautious until there are clearer signs of a rebound in U.S. demand and margin stability [20]