It's not easy to make a name for yourself in the hypercompetitive fashion and retail sectors. But this is exactly what Lululemon (LULU 0.14%) has done. It's the clear pioneer in the athleisure niche of the industry.
This apparel stock was once a monster winner for investors. However, it has taken shareholders on a volatile journey in recent times. If you invested $1,000 in Lululemon five years ago, here's how much you'd have today.
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Losing the market's confidence
Lululemon has been a money-losing investment. Over the last five years, the stock has dropped an alarming 44% (as of Sept. 29). Had you invested $1,000 in the company's shares in the fall of 2020, you'd have $562 today. That's an extremely disappointing track record, especially since the S&P 500 (^GSPC -0.15%) has doubled during the same time.
Facing notable challenges
Lululemon remains a premium brand; it reported a stellar gross margin of 58.5% in Q2 (ended June 30). It continues to grow, especially in China, where revenue surged 25% year over year during the second quarter. And the company's balance sheet carries zero debt.
However, Lululemon has struggled to drive greater consumer interest in the crucial Americas segment, where same-store sales dipped 4%. It's being negatively impacted by tariffs. And competition is intense, which can shift spending away from Lululemon and to rival brands.
The stock trades at a bargain valuation. But there is risk to the story.
