lululemon athletica inc. (LULU): A Bull Case Theory

We came across a bullish thesis on lululemon athletica inc. on The Analyst's Journal’s Substack by A_Capital. In this article, we will summarize the bulls’ thesis on LULU. lululemon athletica inc.'s share was trading at $184.18 as of November 28th. LULU’s trailing and forward P/E were 12.57 and 13.72 respectively according to Yahoo Finance.

lululemon athletica inc., together with its subsidiaries, designs, distributes, and retails technical athletic apparel, footwear, and accessories for women and men under the lululemon brand in the United States and internationally. Lululemon Athletica’s 65% decline from peak valuations has created a distressed setup in an otherwise premium, long-term compounding business.

Despite cyclical pressures and a sharp slowdown from historic 30–40% growth to just 10% YoY, the company’s fundamentals remain resilient, with revenue rising from $0.1B in 2007 to $10.9B LTM and profitability anchored by 59% gross margins and 23% operating margins. The brand’s global strength, community-driven model, and product innovation continue to differentiate it in a competitive landscape dominated by Nike, Adidas, and fast-growing DTC challengers.

Lululemon’s diversification across stores, e-commerce, and interactive fitness, coupled with a broadening product portfolio, gives it multiple avenues for recovery. International markets—particularly China and Europe—represent meaningful whitespace, while the underpenetrated men’s segment and early-stage footwear line provide multi-year expansion potential.

Near-term risks, including elevated inventory of $1.7B, slower inventory turns, and macro-driven discretionary spending softness, have fueled negative sentiment and contributed to the valuation reset. Yet the company’s strong cash generation ($1.9B operating cash flow), clean balance sheet, and proven ability to scale margins through disciplined execution provide downside protection.

If inventory normalizes and growth reaccelerates via international traction and product category expansion, significant re-rating potential exists, with upside of 50–150% depending on growth outcomes and multiple recovery. While growth may continue decelerating before stabilizing, the current selloff appears to reflect excessive pessimism relative to Lululemon’s structural strengths. For long-term investors, this presents an attractive entry point with an asymmetric risk/reward profile, provided they can look through near-term volatility and adopt a staged accumulation approach.

Previously we covered a bullish thesis on lululemon athletica inc. by FeedbackAlarmed5045 in May 2025, which highlighted the company’s premium pricing power, strong brand moat, and international growth potential. The company’s stock price has depreciated approximately by 34.16% since our coverage. This is because growth concerns didn’t play out as expected. The thesis still stands as LULU’s fundamentals remain strong. A_Capital shares a similar view but emphasizes distressed valuation.

Lululemon athletica inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held LULU at the end of the second quarter which was 48 in the previous quarter. While we acknowledge the potential of LULU as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.