Valued at a market capitalization of US$19.2 billion, Lululemon (NASDAQ:LULU) is one among essentially the most recognizable retail manufacturers globally. It designs, distributes, and sells athletic attire, footwear, and equipment for men and women below the Lululemon model.

LULU inventory went public in September 2007 and has since returned greater than 1,000% to shareholders. Nevertheless, it has grossly underperformed the broader market lately, buying and selling virtually 70% beneath all-time highs.

Let’s see if you should purchase the dip in Lululemon inventory proper now.

Is Lululemon inventory a very good funding in 2025?

Lululemon reported combined second-quarter outcomes, with earnings exceeding expectations however income falling brief. This prompted the athletic attire retailer to slash full-year steerage amid mounting pressures in its core U.S. market and escalating tariff prices. The corporate now expects 2025 income development of simply 4% to six%, excluding the prior 12 months’s 53rd week, down from earlier estimates.

Within the fiscal second quarter (Q2), U.S. income remained flat 12 months over 12 months, with comparable gross sales declining 3% as customers confirmed indicators of fatigue. Notably, informal franchises like Scuba, Softstreme, and Dance Studio account for 40% of the product combine. Administration acknowledged that product life cycles ran too lengthy in lounge and social classes, which made choices “stale” and “too predictable.”

Tariff pressures impacted margins, with the elimination of the de minimis exemption and better reciprocal charges creating an estimated US$240 million mitigated affect on gross margin for 2025. Lululemon expects a 300-basis-point decline in full-year gross margin, with 220 foundation factors attributed to tariff-related prices. The athleisure big had benefited meaningfully from delivery two-thirds of U.S. e-commerce orders from Canada below the de minimis exemption.

Worldwide markets continued to ship sturdy development, which offset weak gross sales within the U.S. China Mainland income elevated 25%, with comparable gross sales up 16%. Nevertheless, administration famous early indicators of macro-driven headwinds in tier-one cities. The remainder of the world income grew 19%, supported by ongoing market growth, together with new shops in Italy, Turkey, and Belgium.

Digital channel power emerged as one other tailwind, with on-line income rising 9% to succeed in US$1 billion, representing 39% of whole income. Lululemon’s membership program now consists of roughly 30 million members, demonstrating continued model loyalty regardless of product challenges.

CEO Calvin McDonald outlined a complete product reset led by World Artistic Director Jonathan Cheung, specializing in rising the proportion of recent kinds from 23% to 35% of the assortment by spring 2026.

Is LULU inventory undervalued?

Analysts forecast Lululemon’s gross sales to extend from US$10.6 billion in fiscal 2025 (resulted in January) to US$14 billion in fiscal 2030, indicating an annual development charge of lower than 6%. Over the past 5 years, its gross sales have grown by 21.6% yearly.

Comparatively, adjusted earnings per share are forecast to develop from US$14.64 in fiscal 2025 to US$20 in 2030, indicating a 6.4% annual development charge. Over the previous 5 years, Lululemon has grown adjusted earnings at an annual charge of 24%.

At present, LULU inventory trades at 12.6 instances ahead earnings, which is decrease than its 10-year common of 34 instances. If LULU inventory trades at 12 instances earnings, it ought to be priced at US$240 in early 2029, indicating an upside potential of virtually 50% from present ranges. LULU inventory additionally trades at a 23% low cost to consensus worth targets in September 2025.