Lululemon Athletica (NASDAQ: LULU) definitely is not profitable over the market as of late. After offering a disappointing second-quarter 2025 (ended Aug. 3) monetary replace, shares have cratered. They fell 19% the next day.
Regardless of the autumn, here is one purpose that each investor ought to learn about Lululemon.
Lululemon is understood for promoting costly athletic attire and footwear. It is positioned on the premium finish of the market. Nonetheless, the inventory is promoting on the low cost rack.
If buyers wished to purchase this inventory, they solely should pay a price-to-earnings (P/E) ratio of simply 14. This represents a large 44% low cost to the S&P 500 index. Nike, the heavyweight within the trade, trades at a a lot steeper P/E a number of of 34.9.
It is no marvel shares have turn out to be so low cost. Prior to now 5 years, Lululemon inventory is down 53% (as of Sept. 5). They usually at the moment commerce 67% beneath their peak from lower than two years in the past. There’s a ton of pessimism surrounding the enterprise as of late.
Traders is perhaps fascinated by including Lululemon to their watch lists. Regardless of the corporate’s struggles, particularly sluggish gross sales amid the macro headwinds and intense competitors, there are causes to be optimistic.
The corporate remains to be extremely worthwhile. Its Q2 gross margin of 58.5% and working margin of 20.7% are each excellent figures. And these are coming at a time of nice problem for Lululemon.
Moreover, administration nonetheless sees development potential on the horizon. Lululemon at the moment has 784 shops, however it plans to open 40 to 45 internet new areas for all of fiscal 2025. A superb portion of these will come internationally, significantly in China, the place Lululemon posted sturdy same-store gross sales development of 17% through the second quarter.
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