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Lululemon is Near 52-Week Lows as Q4 Results Approach: Buy, Sell, or Hold?
Investor confidence in Lululemon (LULU - Free Report) has slipped as the athletic apparel leader contends with slower growth and tightening margins.
Slowing Lululemon’s expansion has been mounting cost pressures, most notably higher import tariffs. That said, investors are certainly wondering if Lululemon can change this ailing outlook narrative when it reports its Q4 results after-market hours on Tuesday, March 17.
Performance Overview & CEO Search
Leading up to its Q4 report, LULU shares have dropped 50% in the last year and are trading near a 52-week low of $156.
Despite consistently exceeding EPS expectations, as illustrated by the green arrows in the Price, Consensus, and Surprise chart, the steep decline in Lululemon’s stock continued after providing weaker-than-expected Q4 guidance in September due to softer demand in its core U.S. market.
Weaker U.S. sales and shareholder pressure led to the resignation of former CEO Calvin McDonald, who stepped down at the end of January. McDonald will remain an advisor through the end of the month, as Lululemon’s board searches for his successor, with two senior executives being in charge as interim co-CEOs for the time being.
Image Source: Zacks Investment Research
Lululemon’s Q4 Expectations
Lululemon’s Q4 sales are expected to be virtually flat from a year ago at $3.6 billion. On the bottom line, Q4 EPS is expected at $4.77, a 22% drop from $6.14 per share in the prior year quarter.
However, Lululemon has exceeded the Zacks EPS Consensus for a remarkable 22 consecutive quarters, posting an average earnings surprise of 7.79% in its last four quarterly reports.
Rounding out its fiscal 2026, Lululemon’s full-year EPS is expected to be down 11% to $13.04, even with annual sales thought to have increased over 4% to $11.08 billion.
Image Source: Zacks Investment Research
Guidance Expectations
Of course, the ability to provide favorable guidance will be most crucial to LULU’s rebound prospects. Lululemon typically provides quarterly and full-year guidance for both revenue and EPS.
Keeping this in mind, Wall Street expects Lululemon’s Q1 sales to be up 5% year over year to $2.49 billion, with total sales for FY27 expected to be up 5% as well to $11.62 billion. EPS for Q1 is expected at $2.31, with full-year FY27 EPS projected at $12.77, declines of roughly 11% and 2%, respectively.
LULU’s Complexing Valuation & Capital Efficiency
Trading at its cheapest P/E valuation in a decade at 12X forward earnings, LULU trades intriguingly below its Zacks Textile-Apparel Industry average of 18X and offers an even sharper discount to the benchmark S&P 500.
Image Source: Zacks Investment Research
LULU is also at the often preferred level of less than 2X forward sales, and stands out in terms of liquidity metrics like cash flow per share (CFPS).
Although Lululemon has a superb CFPS of 18X compared to the industry average of around 2X, it's noteworthy that the company’s free cash flow (FCF) conversion rate has turned negative (-3.8%). While this could be temporary, the often preferred FCF conversion rate is around 75-80% or higher, with Lululemon’s typically at 65-70%.
In other words, the high CFPS shows that Lululemon’s business generates significant cash, yet the deteriorating FCF conversion is a sign that the company has become less efficient at turning this into true free cash flows due to higher working capital needs and elevated CapEx.
Image Source: Zacks Investment ResearchOn the other hand, Lululemon’s return on invested capital (ROIC) has remained above the admirable level of 20% or higher and shows efficiency in using its capital investments to generate profits. This is one of the clearest indicators of long-term shareholder value, but it's worth noting that Lululemon’s ROIC has fallen sharply as well.
Image Source: Zacks Investment Research
Summary & Final Thoughts
Lululemon stock is certainly drawing attention as a potential rebound prospect, considering LULU is at historically cheap levels in terms of P/E and still has a favorably high ROIC. For now, LULU lands a Zacks Rank #3 (Hold) as delivering strong Q4 results and favorable guidance will be crucial to more upside.
While there still appears to be long-term value, more strategic clarification will be needed surrounding Lululemon's leadership transition and progress on tariffs, including the restructuring of its supply chain and cutting internal costs.
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Lululemon is Near 52-Week Lows as Q4 Results Approach: Buy, Sell, or Hold?
Investor confidence in Lululemon (LULU - Free Report) has slipped as the athletic apparel leader contends with slower growth and tightening margins.
Slowing Lululemon’s expansion has been mounting cost pressures, most notably higher import tariffs. That said, investors are certainly wondering if Lululemon can change this ailing outlook narrative when it reports its Q4 results after-market hours on Tuesday, March 17.
Performance Overview & CEO Search
Leading up to its Q4 report, LULU shares have dropped 50% in the last year and are trading near a 52-week low of $156.
Despite consistently exceeding EPS expectations, as illustrated by the green arrows in the Price, Consensus, and Surprise chart, the steep decline in Lululemon’s stock continued after providing weaker-than-expected Q4 guidance in September due to softer demand in its core U.S. market.
Weaker U.S. sales and shareholder pressure led to the resignation of former CEO Calvin McDonald, who stepped down at the end of January. McDonald will remain an advisor through the end of the month, as Lululemon’s board searches for his successor, with two senior executives being in charge as interim co-CEOs for the time being.
Image Source: Zacks Investment Research
Lululemon’s Q4 Expectations
Lululemon’s Q4 sales are expected to be virtually flat from a year ago at $3.6 billion. On the bottom line, Q4 EPS is expected at $4.77, a 22% drop from $6.14 per share in the prior year quarter.
However, Lululemon has exceeded the Zacks EPS Consensus for a remarkable 22 consecutive quarters, posting an average earnings surprise of 7.79% in its last four quarterly reports.
Rounding out its fiscal 2026, Lululemon’s full-year EPS is expected to be down 11% to $13.04, even with annual sales thought to have increased over 4% to $11.08 billion.
Image Source: Zacks Investment Research
Guidance Expectations
Of course, the ability to provide favorable guidance will be most crucial to LULU’s rebound prospects. Lululemon typically provides quarterly and full-year guidance for both revenue and EPS.
Keeping this in mind, Wall Street expects Lululemon’s Q1 sales to be up 5% year over year to $2.49 billion, with total sales for FY27 expected to be up 5% as well to $11.62 billion. EPS for Q1 is expected at $2.31, with full-year FY27 EPS projected at $12.77, declines of roughly 11% and 2%, respectively.
LULU’s Complexing Valuation & Capital Efficiency
Trading at its cheapest P/E valuation in a decade at 12X forward earnings, LULU trades intriguingly below its Zacks Textile-Apparel Industry average of 18X and offers an even sharper discount to the benchmark S&P 500.
Image Source: Zacks Investment Research
LULU is also at the often preferred level of less than 2X forward sales, and stands out in terms of liquidity metrics like cash flow per share (CFPS).
Although Lululemon has a superb CFPS of 18X compared to the industry average of around 2X, it's noteworthy that the company’s free cash flow (FCF) conversion rate has turned negative (-3.8%). While this could be temporary, the often preferred FCF conversion rate is around 75-80% or higher, with Lululemon’s typically at 65-70%.
In other words, the high CFPS shows that Lululemon’s business generates significant cash, yet the deteriorating FCF conversion is a sign that the company has become less efficient at turning this into true free cash flows due to higher working capital needs and elevated CapEx.
Image Source: Zacks Investment ResearchOn the other hand, Lululemon’s return on invested capital (ROIC) has remained above the admirable level of 20% or higher and shows efficiency in using its capital investments to generate profits. This is one of the clearest indicators of long-term shareholder value, but it's worth noting that Lululemon’s ROIC has fallen sharply as well.
Image Source: Zacks Investment Research
Summary & Final Thoughts
Lululemon stock is certainly drawing attention as a potential rebound prospect, considering LULU is at historically cheap levels in terms of P/E and still has a favorably high ROIC. For now, LULU lands a Zacks Rank #3 (Hold) as delivering strong Q4 results and favorable guidance will be crucial to more upside.
While there still appears to be long-term value, more strategic clarification will be needed surrounding Lululemon's leadership transition and progress on tariffs, including the restructuring of its supply chain and cutting internal costs.