Despite a 34% decline in Lululemon’s stock price so far this year, the company showed a strong performance in fiscal year 2023 with a 19% increase in revenue and improved margins. However, the stock has been down this year due to lower-than-expected guidance for Q1 2024, reflecting a weaker outlook in the U.S. market and planned increased spending. Despite this, management is still guiding for double-digit growth for the full year and expects profitability to rebound over the next several quarters. Lululemon’s P/E ratio remains lower than historical averages and its competitors, but its operating margins are unmatched in the industry, with potential for further growth in its men’s category and international business.
Lululemon’s stock has seen little change over the past three years, trading at around $336 currently compared to levels of $350 in early 2021. While the stock has underperformed the S&P 500 in recent years, it has shown returns of 12% in 2021, -18% in 2022, and 60% in 2023. In comparison, the S&P 500’s returns were 27% in 2021, -19% in 2022, and 24% in 2023. With the current uncertain macroeconomic environment and potential challenges such as high oil prices and elevated interest rates, the question remains whether Lululemon will continue to underperform the S&P 500 in the next 12 months or see a strong jump in performance.
Looking ahead, analysts forecast Lululemon’s revenues to reach $10.8 billion for fiscal year 2024, up 12% year-over-year, and expect earnings per share to come in at $14.09. Based on these forecasts, the company’s valuation is revised to $432 per share, almost 29% higher than the current market price. It is also important to consider how Lululemon’s peers are performing and compare metrics that matter to make informed investment decisions.
Overall, despite a recent decline in its stock price, Lululemon has shown strong performance in fiscal year 2023 and has potential for growth in the future. With a focus on double-digit growth for the full year and plans to rebound profitability over the next several quarters, the company remains optimistic about its long-term outlook. Investors may want to consider the growth opportunities presented by Lululemon’s underpenetrated men’s category and international business, along with its unmatched operating margins compared to competitors in the industry.
