Lululemon (NASDAQ: LULU), which provides premium athletic apparel and accessories, has hit a rough patch this year. It has been one of the worst-performing stocks in the S&P 500 in 2025, tumbling nearly 47% year to date. Notably, the broader market is up around 10% over the same period. Further, from its 52-week high of $423.32, Lululemon shares have lost more than half their value.
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Here’s what is hurting Lululemon stock
The biggest concern surrounding Lululemon’s struggles is a moderation in its growth rate, particularly in the U.S., its largest market. By regions, comparable sales in the Americas slipped 2% in the first quarter (Q1) of 2025, a sign that fewer customers are shopping for its products. Management pointed to inflationary pressures, waning consumer confidence, and shifting discretionary spending habits as reasons behind softer demand. Simply put, shoppers are being more selective, and competition in the athletic wear space remains tough.
Beyond consumer trends, Lululemon is also battling a more challenging cost environment. Recently imposed tariffs on goods imported into the U.S. have driven up inventory costs. These higher expenses directly threaten margins, with management warning that gross margin could shrink by about 200 basis points year over year in Q2. Along with tariffs, higher occupancy costs, depreciation, and the need for modest markdowns will also impact short-term profitability.
To offset rising costs, Lululemon is planning targeted price increases and pursuing efficiency measures. However, management acknowledged that the benefits of these initiatives will largely materialize in the second half of the year and into 2026. Until then, margin pressures and muted U.S. demand could keep weighing on performance.
How to play Lululemon stock?
Lululemon continues to face a difficult operating environment, with global trade uncertainties, inflationary pressures, intensifying competition, and broader macroeconomic volatility all weighing on its performance. While demand in China remains strong and should continue to support revenue growth, softer consumer spending in the U.S. could keep overall momentum in check for the time being.
To combat these headwinds, Lululemon is focusing on product innovation and brand strength. Management highlighted in its latest earnings call that customers are responding well to new additions in its product lineup. Moreover, the company’s premium positioning within the performance athletic apparel space gives it an edge over fashion-driven peers. By introducing fresh styles with the potential to become long-term staples, Lululemon aims to drive demand and deepen customer loyalty. It is also leveraging marketing campaigns and a membership program to drive customer purchases.
In addition, geographic expansion remains a core part of the growth strategy. In 2025, Lululemon plans to open 40 to 45 net new company-operated stores and complete about 40 store optimizations, driving low double-digit square footage growth. While 10 to 15 of those stores will be in the Americas, the majority of new locations will be focused on international markets, particularly China, where consumer appetite for the brand remains robust.
Despite its growth initiatives, near-term uncertainty is likely to linger as U.S. demand softens and macro challenges persist.
LULU stock currently trades at the next 12-month price-to-earnings multiple of 13.9 times, which is well below its historical average. Its discounted valuation offers a buying opportunity for investors with a long-term outlook and willing to look beyond short-term volatility in Lululemon stock.
