Lululemon outlook and stock don't align

Sometimes a company and its share price part ways.

- DAVID OLIVE

For most of its 26 years in business, Lululemon could do no wrong by investors. But this year many have looked for reasons to avoid the stock, David Olive writes. Despite its woes, the retailer is on track to double its revenues to $12.5 billion by 2026 from 2021 and expects to quadruple sales outside of North America in that time, including in China.

Such is the case with Lululemon Athletica, the Vancouver-based giant in apparel retailing.

By and large, Lululemon is doing fine, with sound prospects for future growth.

But Lululemon stock has been a disaster, its price having dropped almost 50 per cent this year, erasing about $30 billion (U.S.) in shareholder value.

The story of Lululemon’s cratering share price is a reminder of Warren Buffett’s rule not to confuse a company with its stock.

In an act of irrational exuberance, investors almost doubled the price of Lululemon shares in the short space of 20 months to December 2023, when the price peaked at $511 a share. Shares now trade at $259.

Driving up the stock price was an investor conviction that the wellness and remote-work trends coming out of the pandemic would propel Lululemon’s share price to ever greater heights.

When reality set in, early this year, investors began dumping the stock, with scant attention to the company’s financial performance.

The wellness and remote work trends had faded by the beginning of this year, giving way to a cost-ofliving crisis that has had its greatest negative impact on companies that sell premium-priced goods.