Recent years have been tough sledding for Lululemon Athletica (LULU 3.69%) investors. While the broad market indices are soaring, the apparel retailer's stock is down 20% cumulatively in the past five years -- and down 52% from all-time highs.
Revenue growth has slowed significantly, with new competition entering the market amid slowing overall consumer spending on athleisure items. Pessimism has slowly crept into the share price, sending its price-to-earnings ratio (P/E) near a 10-year low.
Despite this pain and underperformance, I believe Lululemon has a chance to 10x its stock for shareholders over the long haul. Here's why.
NASDAQ: LULU
Key Data Points
Room to keep taking market share in America
In the first quarter of 2022, Lululemon's North America revenue grew 29% year over year. In Q1 2025, that figure has dipped to 4% on a constant currency basis. This is the key factor leading to Lululemon's falling stock price. Wall Street is highly concerned that the brand has reached saturation in the United States and Canada while facing stiff competition from upstart copycat brands.
There may be some truth to new brands stealing some customers that would have instead gone to Lululemon, but the data doesn't support it being the majority reason for this huge revenue growth slowdown. Nike's revenue slipped 11% year over year last quarter, while Athleta's dipped 8%. Lululemon is growing while the competition is shrinking. That's why management stated that it gained share within its product category so far in 2025, which is categorized as premium athletic wear.
So what is behind the revenue slowdown? In the pandemic and work-from-home peak, spending on athleisure apparel boomed, benefiting Lululemon. Now, that trend is partially reversing, which is affecting Lululemon's growth. Taking a longer view, more casual athleisure clothing has taken share from formal wear for decades. I expect this to continue once this pandemic reversion ends.
As a market share taker in the category, Lululemon should be able to accelerate revenue growth in North America once this occurs. It is still a small player in the U.S. apparel market, which is estimated to have $359 billion in annual spending.
Image source: Getty Images.
Going global with China and other markets
The Americas are still 73% of Lululemon's net revenue, although the region is much smaller as a percentage of overall apparel sales globally. This gives Lululemon a clear path to grow internationally for years to come.
Last quarter, China mainland revenue grew 22% year over year in constant currency to $368.1 million. This is just barely making a dent in the country's population of 1.4 billion people. At the same time, consumer spending in China has been hurt due to the collapse of a real estate spending bubble, which has affected popular international brands like Nike and Apple. Despite this, Lululemon's growth looks fantastic in China, which should be a positive signal for investors.
Growth has been rock-solid in other markets, with revenue not in North America or China growing 17% year over year to $328 million. In areas like Australia, other Asian countries, and Latin America, Lululemon has plenty of room to grow its premium athleisure brand. Both China and the Rest of World segment should keep gaining as a percentage of Lululemon's overall revenue, which would be a tailwind to help reverse this slow revenue growth.
Add up the potential of the North America, China, and Rest of World segments, and I believe Lululemon can generate consolidated double-digit revenue growth over the next decade, even though it only grew 8% on a constant currency basis last quarter.
LULU PE Ratio data by YCharts.
The buyback cherry on top
Today, Lululemon's revenue is just under $11 billion annually. Due to the factors discussed above, I think Lululemon's revenue can double or triple in the next 10 years.
In order for the stock to 10x, we need some more factors to push the share price higher. For one, Lululemon has consistently raised the bar on its profit margins due to its pricing power in high-end athleisure. Tariffs on imports to the United States could pose a roadblock to this progress in the near term, but I see no reason why further scale won't lead to further profit margin expansion for the brand.
Second, Lululemon is consistently repurchasing its outstanding shares at this cheap price. Its shares outstanding are down 6% in the last three years. This may not seem like much, but a steadily declining share count can be another way for the magic of compound interest to help boost stock returns, just with the compounding working in the negative direction. As Lululemon's shares outstanding keep coming down, its stock price should rise even more over the next 10 years.
Lastly, Lululemon's shares are trading at a P/E ratio of 16.6, close to their lowest level in the last 10 years. As revenue growth accelerates, this earnings multiple should begin to normalize back to its long-term average, which will further juice stock returns.
It won't occur because of any hypergrowth on the revenue line, but Lululemon can 10x for shareholders due to a combination of steady growth, margin expansion, share buybacks, and multiple expansion over the next 10 years.
