LULU Plunges After Guidance Disappoints, Should You Buy the Dip?

Lululemon shares plummeted 19.94% to $264.83 following strong Q1 earnings that beat expectations, as investors focused on disappointing guidance cuts driven by tariff concerns. Despite beating EPS estimates with $2.60 versus $2.58 expected, the athletic apparel giant slashed full-year profit forecasts amid what CEO Calvin McDonald called a “dynamic macroenvironment.”

Lululemon’s Stock Plunges on Weak Guidance, Despite Strong Q1 Results

Lululemon delivered solid Q1 2025 results with revenue growing 7% to $2.37 billion, beating estimates of $2.36 billion, while EPS of $2.60 exceeded the $2.58 consensus.

The company achieved growth across all channels and categories, with international sales surging 19% (20% on constant currency) and gross margins expanding 60 basis points to 58.3%.

However, comparable sales growth of just 1% fell well short of the expected 4.56%, with Americas comps declining 2% as CEO McDonald noted U.S. consumers “remain cautious right now, and they are being very intentional about their buying decisions.”

The stock’s dramatic decline reflects investor concern over revised guidance as management expects tariffs to pressure earnings in the second half. Lululemon cut its full-year EPS forecast to $14.58-$14.78 from the previous $14.95-$15.15, primarily due to tariff impacts.

CFO Meghan Frank stated the company plans “strategic price increases, looking item by item across our assortment” to mitigate effects, with modest hikes on a small portion of products starting in Q2. The company expects full-year gross margins to decrease 110 basis points versus 2024, significantly worse than prior guidance of a 60-basis point drop, with the difference “driven predominantly by increased tariffs.”

Is LULU Trading at a Discount After 30% Drawdown?

With shares now down 30.75% year-to-date versus the S&P 500’s 2.14% gain, Lululemon trades at compelling valuations: a forward P/E of 21.74, enterprise value-to-revenue of 3.73, and strong fundamentals including 42.49% return on equity and $1.33 billion in cash.

Analysts from JPMorgan and UBS cut price targets though both remain above current levels.

The company’s resilient business model, loyal high-income customer base, and international growth prospects (particularly the 21% growth in China) suggest the selloff may present an opportunity for long-term investors.

However, near-term headwinds from tariffs, cautious U.S. consumers, and margin pressure warrant careful consideration of entry timing and position sizing.

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Originally Posted June 6, 2025 – LULU Plunges After Guidance Disappoints, Should You Buy the Dip?

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.