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Is lululemon Women's Category Growth Enough to Offset Margin Strains?
ZACKS· 2025-08-28 16:16
Core Insights - lululemon athletica inc.'s women's business is central to its brand identity and long-term growth strategy, with strong traction in franchises like Align, Daydrift, Shake It Out, and BeCalm [1] - The company has successfully launched products such as the No Line Align leggings, which sold out quickly, indicating robust demand for women's apparel [2] - Despite strong women's revenue growth, lululemon faces margin pressures due to elevated tariffs, higher occupancy costs, and increased SG&A expenses, leading to expected operating margin contraction in fiscal 2025 [3][4] Women's Revenue Performance - Women's revenues increased by 7% in the first quarter of fiscal 2025, demonstrating steady demand amid a cautious consumer environment [4][9] - The women's category is becoming a critical growth engine for lululemon, competing with NIKE and Ralph Lauren in the premium activewear market [5] Competitive Landscape - NIKE's women's business is expanding, with over 50% growth in basketball and strong consumer response to new launches, positioning it as a key growth lever despite margin pressures [6] - Ralph Lauren's women's category is also performing well, with double-digit growth in core collections, although it faces macroeconomic challenges [7] Financial Metrics - lululemon's shares have declined by 46.8% year to date, compared to a 26.4% decline in the industry [8] - The company trades at a forward price-to-earnings ratio of 13.75X, higher than the industry's 11.28X [10] - The Zacks Consensus Estimate indicates a year-over-year earnings decline of 2.2% for fiscal 2025, with a projected growth of 7.2% for fiscal 2026 [12]
Will lululemon's Innovation Pipeline Deliver Growth in 2H25?
ZACKS· 2025-07-24 15:50
Core Insights - Innovation is central to lululemon athletica inc.'s brand identity, with a focus on blending function, style, and science to navigate a complex retail landscape and reignite growth momentum in fiscal 2025 [1][2] Innovation and Product Development - Lululemon's growth in the second half of fiscal 2025 relies on its innovation engine, with strong guest responses to new product launches like No Line Align leggings and Glow Up training leggings, which are expected to expand across stores [3][9] - The company is doubling down on product development, brand activation, and international expansion despite macroeconomic pressures and cautious consumer behavior in the U.S. [2] Financial Performance and Challenges - Tariff headwinds and cost pressures have impacted margins in the first half of fiscal 2025, prompting lululemon to implement modest price increases and supply-chain adjustments to mitigate these challenges in the latter half of the year [4][9] - Lululemon's shares have declined by 41.4% year to date, compared to a 24.2% decline in the industry [8] Valuation and Earnings Estimates - Lululemon trades at a forward price-to-earnings ratio of 14.88X, which is higher than the industry's 11.51X [10] - The Zacks Consensus Estimate for lululemon's fiscal 2025 earnings indicates a year-over-year decline of 1.1%, while fiscal 2026 suggests growth of 8.3% [11]
NIKE vs. lululemon: Which Stock Wins the Activewear Showdown?
ZACKS· 2025-07-08 16:01
Core Insights - The athletic apparel industry is characterized by competition between NIKE Inc. and lululemon athletica inc., with NIKE being a global leader and lululemon focusing on premium, direct-to-consumer offerings [1][2] NIKE Overview - NIKE holds a significant share in the consumer discretionary sector with a diverse portfolio including NIKE, Jordan, and Converse, appealing to various demographics [3] - The "Win Now" strategy launched in fiscal 2025 aims to enhance growth through sport-led innovation and product mix optimization, with key franchises being adjusted for better performance [4][5] - Despite a 10% year-over-year revenue decline in fiscal 2025, NIKE's holiday order book is improving, and the company is expected to benefit from a streamlined digital strategy and a strong product pipeline [6][7] lululemon Overview - lululemon is experiencing growth in the premium activewear segment, with fiscal 2025 first-quarter revenues increasing by 7% year-over-year to $2.4 billion and a gross margin expansion of 60 basis points to 58.3% [8][9] - The company operates 770 stores globally, with 41% of sales coming from digital channels, and is focusing on innovation and global expansion through new product launches [10][11] - lululemon's "Power of Three X2" strategy aims to grow product categories, expand internationally, and double digital revenues while maintaining premium pricing [12] Financial Performance - NIKE's fiscal 2026 sales and EPS estimates indicate year-over-year declines of 1.5% and 21.8%, respectively, reflecting recent challenges [14] - lululemon's fiscal 2025 sales are projected to grow by 5.7%, while EPS is expected to decline by 1% [15] - Year-to-date, NIKE shares have increased by 1.2%, while lululemon's stock has decreased by 37.9% [18] Valuation Insights - NIKE is trading at a forward P/E multiple of 42.85X, above its five-year median of 30.77X, while lululemon's forward P/E is at 15.83X, below its median of 30.78X [19][22] - lululemon's valuation appears attractive, supported by its growth strategy, while NIKE's higher valuation reflects its repositioning efforts for sustainable growth [22] Conclusion - NIKE is showing signs of recovery with improving wholesale momentum and a focus on performance products, despite downward revisions in earnings estimates [23] - lululemon, while facing near-term challenges, maintains a strong long-term strategy centered on innovation and international expansion [24] - Both companies represent significant players in the activewear market, with NIKE offering stability and lululemon presenting growth potential at a more favorable valuation [25]