When an apparel brand starts showing signs of stress, sales sliding, margins crumbling, losses mounting, the Street doesn’t hesitate to slap the “dying business” label on it.
That’s why it might surprise some investors that Lululemon doesn’t actually fit that description right now. In Q2, sales rose, margins held within historical ranges, and earnings only marginally dipped.
These are hardly the hallmarks of a company in freefall, so why is sentiment around this stock so sour?
Key Points
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Sales are still growing but North American growth has stalled, and tariffs are expected to cut $240 million from profits this year.
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Lululemon still commands high customer loyalty and maintains a 20% operating margin.
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At a 40% discount to the S&P 500 earnings average, plus ongoing share buybacks, the stock offers long-term investors a margin of safety if international growth continues and tariff pressures ease.
Why Lululemon Stock Has Been Crushed in 2025
Lululemon is having one of its worst years as a publicly traded company. As of mid-September, it’s locked in a race with The Trade Desk for the dubious honor of being the single weakest performer in the S&P 500. For many investors, poor stock returns are a self-fulfilling prophecy. weak performance breeds weak sentiment.
Beneath that sentiment, though, are real business challenges. The bulk of Lululemon’s revenue comes from the U.S. and Canada, and growth in those markets has stalled. Ironically, it’s partly because of how successful the company has been in prior years. After posting years of double-digit gains, current results look sluggish in comparison.
In addition, most of Lululemon’s gear is manufactured overseas, primarily in Vietnam. That’s why management had to trim its full-year outlook. At the start of 2025, executives were guiding for about over $11 billion in revenue. After Q2, the top-end estimate is $11 billion on the button. Earnings guidance has been cut more sharply by around 14%.
Still a Beloved Brand
But before we start writing Lululemon’s obituary, it’s worth zooming out. Consumer affinity for the brand remains strong.
Its net promoter score sits north of 40. In other words, Lululemon’s customer love hasn’t eroded.
That loyalty is visible in its store metrics too. Foot traffic data from Placer.ai shows Lululemon still commands some of the highest visits per square foot in the athletic apparel sector, even if traffic growth has slowed.
Growth Is Moderating, Not Collapsing
In Q2, revenue in the Americas rose just 1%, a dramatic slowdown from the double-digit growth that investors grew accustomed to but international revenue ballooned 22%, with momentum in China and Western Europe offsetting weakness in North America.
For now, international sales are still smaller than domestic sales, but their faster growth is gradually shifting the mix.
Put together, global revenue rose 7% year over year. That’s not thrilling, but it’s far from a collapse. It’s actually roughly in line with Under Armour’s growth in its stronger years, except Lululemon earns twice the margins.
What the Market May Be Missing
Lululemon’s North American market is saturated say the bears and international growth won’t be enough to compensate. Plus, tariffs will crush margins, and newer athleisure entrants like Alo Yoga and Vuori are stealing share.
The bull case is subtler but more compelling. Brand loyalty remains strong, international sales are accelerating, and margins, even under pressure, are still among the best in the sector.
More importantly, the stock now trades at a 40% discount to the S&P 500’s average earnings multiple, according to Yardeni Research. That valuation gives patient investors a margin of safety that wasn’t there two years ago.
The Bottom Line
The numbers suggest the brand isn’t dying. What we’re really seeing is a growth story taking a pause under the weight of tariffs and tougher year-over-year comparisons. If international sales keep compounding at 20%+ and tariffs prove temporary, today’s challenges could look more like a speed bump than a structural decline.