$Lululemon Athletica(LULU)$ $Gap, Inc(GAP)$ $Nike(NKE)$ 🔥👟🧘‍♀️ Lululemon’s Tipping Point: Strong Brand, Sliding Growth, Would You Buy the Dip? 🧘‍♀️👟🔥

This isn’t just about a 20% drop. Lululemon just lost $8 billion in market cap in a day, and the question is whether this was an overreaction to a soft earnings guide or the market finally recognising a saturation story hiding behind a strong brand.

Let’s break down what just happened, what the charts and fundamentals say, how Lululemon stacks up against its biggest rivals, and whether I’d buy $LULU at these levels.

🧾 Earnings Reality Check: When Fundamentals Collide with Forward Guidance

Lululemon’s latest results weren’t disastrous. The business is still profitable and cash-rich:

   •   Operating margin: 23%

   •   Net profit margin: 17%

   •   No long-term debt

   •   Forward P/E: 17.8x, now below Nike

But the message was clear. Growth is fading fast. Guidance was cut, North America sales softened, and the market punished $LULU with a 20% drop to $265, wiping out months of recovery in a single session.

📉 Comp Sales Collapse: Charting the Real Pain

The most damning visual? The Comparable Sales Growth chart from FinChat. Lululemon has gone from +30% in Q2 2022 to just +1% in May 2025, a staggering 95% collapse in growth. Even more concerning, this is LULU’s slowest comp in over 5 years. Not just deceleration, stagnation.

That’s not priced into a “growth stock,” and the market re-rated accordingly.

🛍️ Product + Sentiment: The Brand Still Resonates, I See It Firsthand

I’ve been a Lululemon customer for years. Their outerwear, joggers, and belt bags are a staple for both comfort and quality. I’ve gifted the brand to friends and family, and everyone still loves the fit and feel. Even the accessories are standout.

So yes, the brand power is real. But the investment case can’t rely on sentiment alone. It has to reconcile with where the numbers are going.

🏬 International Expansion vs Domestic Saturation

Here’s the tricky part. LULU is growing, just not where it needs to.

Last quarter, it opened 13 stores in Mainland China. In the US? Just one. While international expansion is promising, the US is still its revenue engine. Slowing comps in North America mean global momentum needs to overdeliver just to keep the topline flat.

That’s a big ask in a world where the USD is strong, tariffs are a headwind, and consumer spending is stretched thin.

📊 Volume Profile and Technicals: At the Crossroads

The selloff took $LULU down to a key Point of Control (POC) level shown in the volume profile chart, the same zone where bulls stepped in during March.

Technical summary:

   •   Price: $265.27, down -19.80% on the day

   •   Weekly support at $270 held

   •   RSI(6) at 35.08, nearly oversold

   •   MACD momentum down but stabilising

   •   Post-market bounce to $266.10 suggests bargain hunters nibbling

If $260 breaks, we could retest March’s $234.84 low. If bulls defend this volume node, a move back to $300 to $320 isn’t out of reach.

📉 Inventory Rising, Margins Still Holding, For Now

Inventory levels are rising and traffic is declining. This forces discounting, something that goes against LULU’s historic DNA. That said, they’re still protecting margin better than most retailers.

The question is whether that’s sustainable if comps stay at 1 percent and tariff costs bite harder in H2 2025.

🧮 Valuation and Buybacks: Reset Creates Opportunity?

This isn’t a nosebleed valuation anymore. $LULU now trades at just 17.8x forward earnings, lower than many peers with weaker margin profiles.

Evercore just raised its price target to $400, from $320, citing strong brand loyalty, operating leverage, and upside from international store growth. That implies 50 percent upside from here, but the market wants evidence, not hope.

Also unpriced, the share buyback programme, which management said will be aggressive this year. That alone could support EPS even if comps stay low.

📈 Peer Benchmark: LULU Still Leads, But Others Are Catching Up

Five powerful charts say it all:

1. LULU versus Athleta (GAP). US revenue is up 126.36 percent since 2020 while GAP is flat

2. LULU versus Nike and Adidas. LULU has grown 69.2 percent since Q4 2021. Nike is flat. Adidas is down 14.15 percent

3. Comparable sales. No peer has seen this level of deceleration while still preserving profitability

4. Revenue base. Despite slowing, LULU now generates more than $6.5 billion annually from the US alone

5. Technical breakdown. Unlike Nike or Adidas, LULU has held a major volume shelf, offering a potential long setup with defined risk

📍 What I’m Watching Now

   •   Q2 comp guidance revisions and inventory clearing strategy

   •   Buyback execution rate in the next earnings call

   •   Reacceleration signals in China or e-commerce

   •   Tariff impact updates

🎯 Trading Plan: I’m Not Blindly Buying the Dip

Bull case

   •   Rebound from POC confirms with volume → Target $300 to $320

   •   Buybacks tighten float and provide EPS lift

   •   China and international revenue offset US slowdown

   •   Margins stay resilient above 20 percent

Bear case

   •   $260 breaks → heads to $234

   •   Inventory forces deeper discounting

   •   Comps stay below 3 percent → multiple compression resumes

   •   Macro drags LULU into broader consumer discretionary selloff

🧠 Conclusion: I’m Bullish on the Brand, Cautious on the Stock, For Now

As a customer, I’d buy Lululemon again tomorrow. But as a trader, I want confirmation before I take the trade. I’m watching the $260 to $270 zone like a hawk. If it holds and we see volume and sentiment improve, I’ll look for a reentry long with a $320 target.

But I’m not stepping in early just because it looks cheap. Execution has to follow. Growth has to return. Until then, I’ll keep buying the gear, and wait for the chart to give me the green light on the stock.

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