Lululemon (LULU +0.16%) was, for a time, one of the best stocks an investor could own. During the 10-year period leading up to its peak in December 2023, shares skyrocketed by 764%. They've been under immense pressure since then due to the company's subpar results, and are now down by 59% from their all-time high. But there might be an opportunity here for contrarian investors.
Could this apparel stock be a multimillionaire maker? Here's what investors need to know.
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Lululemon's brand is strong, despite its weak results
For its fiscal third quarter, which ended Nov. 2, Lululemon reported that its U.S. revenues fell 3% year over year, with softer sales metrics registered in the previous two quarters as well. Demand domestically has been weak due to both the struggling state of the U.S. consumer and a product assortment that is less aligned with what shoppers want. What's more, tariffs have taken a toll on the company's profits: Operating margin shrank from 20.5% in the prior-year period to 17% in fiscal Q3 2025.
Of course, there's also competition to think about: Lululemon faces threats at the low end of the market from names like Gymshark and Fabletics and at the high end from Alo Yoga and Vuori.
However, if investors zoom out, they will recognize that Lululemon still has its merits. For instance, its overall revenue is still growing. It has a massive opportunity to penetrate the Chinese market. And it has one of the strongest brands in apparel and retail, commands pricing power, is known for high-quality products, and focuses on the premium end of the market.
NASDAQ: LULU
Key Data Points
Variables that can drive stock returns
Lululemon is a good business. It's just going through a rough patch. But this creates a compelling opportunity for interested investors. The stock trades at a price-to-earnings ratio of just 14.6, which is about its cheapest level in 15 years. This means expectations are low.
Lululemon is certainly deserving of investor attention, but those who buy in will need to have patience, as fundamental improvements on margins and U.S. revenues could take some time to materialize. Nonetheless, the setup today is favorable for long-term investors.
The question of whether an investment in Lululemon could turn you into a multimillionaire requires a different perspective. Let's say, in a bullish scenario, the stock soars fivefold in 10 years, translating to a superb annualized gain of 17.5%. You'd need to invest $400,000 right now for the value of your holding to reach $2 million by 2035. That's not a capital outlay that most retail investors can swing, and certainly not what they should put into a single stock.
Consequently, it would best not to imagine Lululemon as a potential ticket to a multimillion-dollar portfolio. The stock is worth taking a closer look at, though.
