Lululemon vs. Nike: Which Stock Is in Better Shape Today?

Key Points

• Lululemon Athletica has lost more than half of its value this year alone as trade uncertainty weighs on its stock.

• Nike is in the early innings of a transition, since its new CEO took over nearly a year ago.

• 10 stocks we like better than Nike ›

Lululemon Athletica (NASDAQ: LULU) and Nike (NYSE: NKE) are two iconic, well-known apparel brands. They're popular with young consumers, and many buyers stick with the brands for years.

In recent years, however, they've encountered significant challenges. Both stocks are down 44% over the past five years. Nike has been on a more steady decline, whereas Lululemon's stock has recently been in a free fall. Which of these beaten-down stocks are you better off taking a chance on today?

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Image source: Getty Images.

The case for Lululemon

Lululemon has been a faster-growing stock in recent years than Nike. It's facing some headwinds right now, but they're arguably temporary ones. The biggest ones are undoubtedly its exposure to tariffs and its dependence on a strong Chinese market.

Of the $4.9 billion in revenue the company has generated through the first half of the year, more than 17% of that came from Mainland China, Hong Kong, and Taiwan. It also imports a lot of products from that part of the world, which means that any trade wars involving the U.S. and China could result in Lululemon's business getting hit heavily on both its top and bottom lines.

But if you believe these headwinds are temporary and trade issues will sort themselves out in the longer term, then Lululemon could be an intriguing buy right now. It has lost more than half of its value since the start of the year, and it trades at a forward price-to-earnings (P/E) multiple of 14, which factors in analyst expectations for how the company will perform in the year ahead. And its price-to-earnings-growth multiple is just under 1, which also signifies that the stock is cheap when compared to its longer-term growth potential.

It wasn't that long ago that the business was growing at a fast rate. In the fiscal year ended Feb. 2, 2025, the company's revenue totaled $10.6 billion, which was up 10% from the previous year, a 31% increase from the $8.1 billion it posted two years earlier. Lululemon's growth is likely to slow in the near term, but with a strong brand, it can recover over the long haul.

The case for Nike

Nike is the big dog in the apparel industry, and it's in the midst of a turnaround under new CEO Elliott Hill, who is looking to rebuild the company's relationships with trusted partners and retailers. It was almost a year ago that he took over, so it's probably too early to declare his strategy a success or failure thus far.

But there's reason to be optimistic, as the company's iconic products are known throughout the world, and few brands are as recognizable as the Nike swoosh.

Nike's business also has the advantage of being more global in nature than Lululemon's. While Greater China is a key market for Nike, that segment accounted for 14% of Nike's revenue in its most recent fiscal year, which ended May 31. The company generated nearly as much revenue from its Asia Pacific & Latin America segment.

Nike's stock is down around 8% this year, in what may be a sign that it is starting to stabilize and potentially bottomed out. Its forward P/E of 40 looks enormous, but as the company works on reducing costs and improving its financials, its earnings multiples should improve.

Why Nike looks to be the better buy today

These two stocks may continue to struggle in the months ahead as consumers still look to be scaling back on discretionary purchases. High-priced apparel may simply not be much of a priority for consumers until economic conditions improve.

But when they do, the stock that may have the most upside is Nike. It has the stronger brand, and it's more diversified, which can allow it to be more flexible in its growth strategy moving forward.

It will, however, likely be a bumpy road ahead for both of these stocks. Regardless of which stock you decide to go with, you'll need to have a lot of patience, as it could take a while before things get better for either one of them.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc. and Nike. The Motley Fool has a disclosure policy.